Econ 111 Study guide for Chapter 1
Econ 111 Study guide for Chapter 1 Economics 111
Popular in Macroeconomics
Popular in Economcs
This 3 page Study Guide was uploaded by amber weiss on Monday January 25, 2016. The Study Guide belongs to Economics 111 at Southern Illinois University Edwardsville taught by Mary Anne Pettit in Spring 2016. Since its upload, it has received 167 views. For similar materials see Macroeconomics in Economcs at Southern Illinois University Edwardsville.
Reviews for Econ 111 Study guide for Chapter 1
I'm pretty sure these materials are like the Rosetta Stone of note taking. Thanks amber!!!
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 01/25/16
Chapter 1 Study Guide Economics 111 Macro Economics Economics gt A social science dealing with the allocations at scarce resources to meet unlimited wants gt Science of constrain choice ResourcesInputs are 1 Land ALL natural resources Examples dirt water air and minerals 2 Labor human effort used in the production process Mental and physical labor Example all NONOWNERS all workers 3 Capital tools equipment machinery used in the production process IS NOT MONEY Example computers technology spatulas buildings etc 4 Entrepreneurial Ability persons who OWN the business They organizepull together factors of production They TAKE RISKS Example Owners andor Shareholders Example Think of your favorite fast food place Taco Bell 1 Land water dirt air and minerals building is on top of 2 Labor workers management that do not hold any shares 3 Capital technology cooking supplies building counters stoves fridges etc 4 Entrepreneurial Ability owners and shareholders The Economic Problems gt We have UNLIMITED WANTS not needs gt Problem SCARCE limited RESOURCES and UNLIMITED WANTS Opportunity Cost gt The most important thing you give up when a choice is made would be the opportunity cost gt The Next Best Alternative gt Your Second Best Choice gt Example Being in class at 1030 am we are giving up Instead we could be doing Sleeping Videogames Eating Another class at the same time Ceteris Paribus is a Latin phrase gt It means quotall other things remaining constantquot gt quotEverything else remains constantquot gt Example the price of apples increase do we buy more or less We buy less At the same time as apple prices increase the government releases a study claiming that eating apples increases your IQ and 6 60 6 60 6 60 6 60 6 60 6 60 health Yes it would affect people39s choices If price of apples increase CETERIS PARIBUS nothing else changes The production possibilities model AKA Proper Possibilities Frontier AKA PPC Look in Textbook for model 3 Assumptions 1 TwoGood Economv only two goods means produces more of one and produce less of the other We have to narrow down Opportunity Cost Example A kid at a pet store the parent says quotnow you can only chose onequot The child must decide A cat vs a dog A hamster vs a bird 2 ALL resources must be ef ciently utilized no idle or unemployed resources Remember a resource are inputs used land labor capital and entrepreneurial ability Example In the mall the stores that are vacantempty are resources not being efficiently utilized 3 Technology and resources xed Allows us to make a model Allows us to work with the model Last Column Opportunity Cost Opportunity cost in this case is the amount of autos given up to produce 1 more unit of bread The opportunity cost is ALWAYS WHAT YOU ARE GIVING UP It is always the MOVEMENT in the model What happens to opportunity cost It increases as you move from quotAquot to quotFquot Law of Increasing Cost as production of goods increase opportunity cost in terms of other goods GIVEN UP will increase VVhy Resources are specialized and not perfectly adaptable among uses The law of increasing cost explains why the PPC is bowed out or concave to origin Why the curve is shaped the way it is Where is the best place to operate See table We do not know enough information ANYWHERE ON THE CURVE NOT INSIDE CURVE Inside the curve would be INEFFICIENT RESOURCESGOODS Example 4 Bread and 6 Autos is inside the curve the goal would be to be on the curve How Simply just move the point to 8 We39ll come back to this idea in a minute What kind of economic system do we have What is it called It is called capitalism emphasize the use of tools machinery and equipment NOT MONEY Market economy is another name What is market is a mechanism or place that brings BUYERS AND SELLERS A market system allocate scarce resources through the interaction of buyers and sellers A mixed market system gets a little help from The government but the role is LIMITED 3 Economic Systems 1 Market systems 2 Command or planned economy Royal family communist party etc have power to make decisions 3 Tradition and custom Allocate resources the way they have always been allocated culture and religion Landholding in most countries Key Elements of Market Economy Capitalist Ideology Our process has evolved and continues too System of free markets and prices Prices are signals in markets and giving information on what is going on Interaction need BOTH buyers and sellers that generate price that leads to aIIocation Thing of buyers and sellers as a pair of scissors you can39t cut with only one blade Role of private property and property rights Either use incentive motivation or cohesion Property rights resources increase a factors production resources are privately owned and we are our own entrepreneur Government used to inforce rules Intellectual property Example The song quotBlurred Linesquot Robin Thicke and PharreI had to pay money because they quotstolequot the song Limited role of Government provide legal and social framework enforce property rights Who to hire no discrimination contract laws Why the limited role continues in number 4 Role of selfinterest as a motivating factor We didn39t need government we have people people have built in desire of what they want
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'