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This 27 page Bundle was uploaded by Checkitout on Saturday February 7, 2015. The Bundle belongs to 102 at Pennsylvania State University taught by Mark McLeod in Winter2014. Since its upload, it has received 224 views. For similar materials see Econ 102 in Economcs at Pennsylvania State University.
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Date Created: 02/07/15
Economics Wednesday August 27 2014 758 PM What is O The study of how people allocate their scarce resources to satisfy anything provided by nature the mental and physical efforts of human beings anything that is provided which in turn is used to produce ot services 0 Physical Capital machines tools equipment 0 Human Capital skills acquired through education and training 0 The study of decision making by individual economic agents househo 0 3 Main Question 0 What to produce 0 How to produce 0 For whom to produce 0 The study of the economy as a whole 0 Main topic 0 Unemployment 0 Output 0 Overall prices 39 their unlimited hergoodsand Ids firms govt 0 Economic growth How do economies answer the three basic question of 0 the question are answered by a central authoril FreeMarket Economy quot LaissezFairequot 0 Markets determine the answers to these questions any price where buyers and sellers come together to buy and sell has elements of both a command economy to a treema vs 0 Makes statements about what is or what will be 0 TH EY ARE TESTABLE STATEMENTS Makes economics makes statements about what we should do or we 0 Example raise minimum wages Economics is a Science 0 Scientific Method 0 O O 0 Make observations Use inductive reasoning to make theories Collect data to test the theories Modify theories Economists use 0 A simplified representation of reality It is a formal statement of a the 0 People are rational ies or govt goods and services rket economy ought to do ory 0 Ceteris Paribus 0 quotAll other things equalquot the value of the next best alternative that we give up or forgo when V 0 Example I cost of going to PSU for one semester I El El El costs that cannot be recovered 740 700 650 580 Tuition nState8286 Activity Fee 93 Books500 Wages lost 6000 Curve A graph showing all possible combinations of goods and servic produced with a given amount of resources and a given technology 0 Example assume there are two types of goods I Consumer Goods goods produced for final consumption I Capital Goods goods which are in turn used to produce otr Capital Goods Ie make a choice es that can be Iergoods Consumer Goods 100 200 300 500 400 O Marginal additional extra 0 Resources are not equally wellsuited to the production of different glt produce more and more of one type of good you have to use resourc less wellsuited to the production of that type of good So you have to resources to produce additional units of that type of good The graph 0 PPC is the drawn assuming a society is 0 using all of its resources 0 using resources efficiently 0 Shifting the PPC O Increasingin resources 0 Increasing in technology 0 Main Points about the PPC O Downward sloping I represents opportunity cost 0 It exists there are limits to what we can produce I scarcity 0 It has a bowed out slope I The law of increasing marginal opportunity cost 0 Points inside represent unemployment or inefficiency O Shifts of PPC I Economic growth 0 Graph 400 500 600 nods As you es that are less and use more and more Examgle 2 Countries Yields per Acre New Zeala nd Wheat 6 Cotton 2 El Each Country has 100 acres of land El Each country wants an equal amount ofwheat and cott Without Trade 0 New Zealand 0 25 acres of wheat X 6 wheatacre 150 O 75 acres of cotton X 2 cottonacre 150 Australia 0 75 acres of X 2 wheatacre 150 O 25 acres of X 6 cottonacre 150 New Zealand to Australia 300 wheat Australia to New Zealand 300 cotton Each country get 300 cotton and wheat DEC on Australia 2 6 0 one country has an absolute advantage in the production of a good 0 if it can produce a given amount of the good using th country can Example 2 Yield per Acre New Zealand Australia Wheat 6 1 Cotton 6 3 o 100 acres each Without Trade 0 NZ 0 50 acres wheat X 6 wheat acre 300 O 50 acres cotton X 6 cottonacre 300 0 Aus O 75 acres wheat X 1 wheatacre 75 O 25 acres cotton X3 cottonacre 75 Suppose O Aus I 100 acres cotton X 3 cottonacre 300 0 NZ I 75 acre wheat X 6 wheatacre 450 Ier another country an the other I 25 acre cotton X 6 cottonacre 150 NZ send 100 wheat to Aus Aus send 200 cotton to NZ NZ 350 cotton 350 wheat Aus 100 cotton 100 wheat One country has a comparative advantage in the production of a gooc country if it can produce a given amount of that good at a the other country can Refer back to Example 2 0 6 wheat costs 0 NZ 6 cotton 0 Aus 18 Cotton 0 NZ has the comparative advantage in the production ofwheat 6 cotton costs 0 NZ 6 wheat O Aus 2 cotton 7 2 over another than AIIC VVheat Cotton I lL 8 Wheat Costs 0 NZ 6 cotton 0 Aus 12 cotton VVheat Cotton NZ 100 Acres each yields per acres Cotton Wheat 150 650 600 300 Aus makes 300 cotton max NZ makes the other 300 units A left for wheat in Aus 100 acres in NZ Aus 50 X1 50 HUJ 12 AUS IhiCh takes 50 acres NZ 100 X 6 600 NZ VVheat 12 Cotton 7 Wheat 350 Aus makes the 350 wheat they use 70 acres 30 acres left to produce cotton30 cotton m 730 Aus
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