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Exam #1 Study Guide

by: Meagan Samele

Exam #1 Study Guide AAEC 1006

Meagan Samele
Virginia Tech

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About this Document

These are a mix of all the notes we took in class.
Economics of the Food and Fiber System
Dr. Mike Ellerbrock
Study Guide
Economics, Econ
50 ?




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This 2 page Study Guide was uploaded by Meagan Samele on Saturday September 17, 2016. The Study Guide belongs to AAEC 1006 at Virginia Polytechnic Institute and State University taught by Dr. Mike Ellerbrock in Fall 2016. Since its upload, it has received 13 views. For similar materials see Economics of the Food and Fiber System in Economics at Virginia Polytechnic Institute and State University.


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Date Created: 09/17/16
Study Guide #1    Economics:   ● The study of the choice  ○ how rational people make wise choices  ● The study of value  ○ What is more important in certain situations    DIamond Water Paradox  ● If water is essential for life and diamonds are not why do diamonds cost more than  water?  ○ Value lies at margins  ○ Scarcity   ○ Want over their needs  ○ Amount of ratio  ● Lessons  ○ #1­Cost does not equal price  ○ #2­ Value lies at the margin  ○ DMU­Diminishing marginal (the effect of doing something one more time) utility  (happiness)  ● Can’t compare values (like comparing apples to oranges)  ● Emotion effects price(happy couple will pay more for a diamond for first time rather than  an anniversary present)  ● The value of anything lies at the margin  ● Depends on the unit  ○ In order to get you to buy second pair of shoes it's half off  ● Economics is about life ‘  ● Opportunity costs­forgone net benefits from not doing your next best thing  ○ How much does it cost to make a choice  ■ Ex: come to Virginia Tech  ○ Choose best or second best choice  ○ Cardinal numbers: we know the exact number difference  ○ Ordinal numbers: When you like something more than another thing  ○ Opportunity cost are invisible but real  ■ Ex 1: How much does it cost to go to Virginia Tech?  ● Tuition is direct and other costs are in direct   ● When you choose to pay to go to college rather than stay home  and work adds to your cost decision.   ■ Ex 2: War  ● Cost of losing soldier, weapons, the war in general  ● Cost of missing out on life  ■ Ex 3: U.S. tugboat sank a barge in a river accidentally   ● Navy admitted it and said they would compensate the barge  company   ● Barge company wanted a brand new one, but Navy argued they  owed them a replacement ​ OT ​a new one  ■ Ex 4: If Sarah is proposed to buy her two boyfriends and chooses Tom,  her opportunity cost is not choosing Mark or staying single (whatever she  prefers)  ○ Sunk cost­ Trying to anticipate how long something might last...fixing a car  versus buying a new one because it's not worth fixing  ● PPC is the production possibilities curve  ● THe marginal cost will outweigh the marginal benefits at some point  ● Most cost curves are “u” shaped   ● Marginal benefits are “hill” shaped  ● Trying to get consumers to pay the price of “optimality”   ● Financial incentives for consumers can help the environment   ● Money is​ LWAYS ​the driving influence  ● Circular flow of income  ○ Spending=earning  ● GNP=C+I+G+(x­m)=Y  ● GNP=based on ownership  ● GDP=based on location  ● GNP is a measurement of production  ○ Always involves money changing hands  ○ Not a measure of quality of life  ○ Says nothing about quality of a product  ● Money ​MUST ​change hands legally   ● THings not in the GNP:  ○ Family  ○ Volunteers  ○ Barder   ○ Internships  ● “Marginal” is the cost of doing one more  ● Economics of scale is u shaped   ● Subsidy­when another group helps pay for your education   ○ You don’t pay full cost  ● Sum of marginals always tells you total   ● Net refers to the difference    


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