All Notes So Far 2.6.24 (Knowt organized)

Chapter 1: Introduction to Economics

Overview

• Economics: The study of how individuals and groups make choices regarding scarce resources and the consequences of those choices on society.

Scarcity

• Scarcity Defined: Items desired where demand surpasses availability.

• Group Activity Instructions:

  • Form a group of 3-4 participants.

  • Designate a recorder for group output.

  • Use Jamboard and set sharing permissions.

  • Create a unique group number from the last two digits of each member's phone number.

  • Record group responses on commonalities and unusual examples of scarcity.

  • Recorders submit both the group number and the Jamboard link.

Examples of Scarcity

• Potable Water: Essential but scarce in many areas.

• Cultural Culinary Examples:

  • Rice cooked with Coke (Colombian tradition).

  • Not just necessity; adds sweetness and acidity.

• Coca-Cola's Resource Consumption:

  • Significant water usage, exemplified by a plant using 68.5% of local water supply in Tocancipá.

  • Higher Coca-Cola consumption associated with poor drinking water quality in Leticia, Colombia.

What is Economics?

• Economics Studies:

  • How choices are made with limited resources.

  • Impact of these choices on broader society.

Positive vs. Normative Economics

• Positive Economics: Objectively analyzes economic behavior.

• Normative Economics: Subjective questions regarding policy.

Chapter 2: Optimization in Decision Making & Specialization

Optimization in Decision Making

• Understanding decisions made to maximize benefits given constraints.

Trade-offs and Constraints

• Trade-offs: Gaining one benefit requires sacrificing another.

• Constraints: Limitations based on resource availability.

Opportunity Cost

• Definition: Value of the next best alternative forgone when making a choice.

Case Studies & Examples

• Pollution Reduction: Analyze costs vs. benefits of pollution reduction.

• Production Possibilities Model: Graphical representation of maximum output possibilities.

Chapter 3: Economic Methods and Questions

Economic Models

• Purpose: Simplify complex economic problems to enhance understanding.

• Components: Economic agents, their choices, and environments.

Demand & Supply Model

• Variables: Quantity Demanded (QD), Quantity Supplied (QS).

• Circular Flow Model: Basic framework for understanding the economy.

Causation vs. Correlation

• Causation: One event influences another directly.

• Correlation: Mutual relationship without implying causation.

Chapter 4: Demand, Supply, and Equilibrium in Markets

Market Equilibrium

• Definition: Point where quantity supplied equals quantity demanded.

• Importance: Efficient resource allocation and maximum total surplus.

Demand Analysis

• Measuring demand through Willingness to Pay (WTP).

• Demand Curve: Reflects relationship between price and quantity demanded.

Supply Analysis

• Law of Supply: Quantity supplied increases as price increases.

Deadweight Loss

• Occurs when total surplus isn’t maximized due to market distortions.

Government Intervention

• Justified for improving equity and addressing market failures.