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FSU - ECO 2013 - Spring 2018 - Week 2 Notes - Class Notes

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FSU - ECO 2013 - Spring 2018 - Week 2 Notes - Class Notes

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background image Notes­ Week 2­ January 16&18  5. More information leads to better decision­making, but more information is costly to get
­always a tradeoff
6. Many choices create a secondary effect ­primary effect is often immediate and visible 
­secondary effect comes later and is not as visible
7. Value is subjective  ­beauty is in the eyes of the beholder
­depends on who you are asking 
8. Economic thinking is scientific thinking  ­economists use data and information generated by people to explain and predict actions  Positive and Normative Economics
­distinguish between two types of economic statements (have examples)
Don’t make these errors: 1. Violation of ceteris paribus (“all things equal” or “other things constant”) ­we want to isolate variables so we typically allow only one to change at a time  2. Good intentions do not necessarily result in good outcomes  ­good intentions with bad policy = bad outcomes  3. Association is not causation  4. Fallacy of Composition ­assumption: what’s good for the individual is good for the group  ­making the assumption when it’s false is the fallacy 
***high heel analogy 
­be able to provide an example Chapter 2  Tools of the Economist  1. Define and recognize examples of opportunity costs 
2. Discern why voluntary trade creates value 
3. Realize why property rights are key to economic progress
4. Illustrate the concepts of tradeoffs, opportunity costs, and growth
What Shall we Give up?
background image Trade Creates Value  Two opposing views of trade 1. When people trade, one person gains and the other person loses  ­referred to as a zero­sum game 2. When people trade, both parties gain ­wealth is actually created by trade  Voluntary trade creates wealth and promotes economic progress  1 Barter trade­ exchange without money; goods for goods
2 Money trade­ exchange goods for money 
What could reduce the value created from a voluntary transaction? Transaction cost­ is a monetary or nonmonetary barrier that lowers the benefits of trade 
Ex: eBay 
Trade: remember paperclip to house analogy  Importance of Property Rights  2 main kinds of property rights 1. Common rights­ everybody (or a large group) owns it  2. Private rights­ only one person (or a small group) owns it  Sometimes somewhere in the middle
Ex: apartment pool; only the people living there can use it
Ex: beach house; a few different families but still closer to private rights  Common property rights provide weak incentives to/private property rights provide stronger 
incentives to:
­give proper care (think about cleaning your own home vs. a public setting) ­conserve for the future (pigs and cows) 
­use resources in ways other people value 
­mitigate (or eliminate) possible harm to others (ex: tree in backyard that was known to be a 
problem potentially falling on neighbor’s house; you bear the cost)
Violating property rights: ­can shift; and we want it to shift out  ­possibilities are greater when it shifts out

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School: Florida State University
Department: Economics
Course: Principles of Macroeconomics
Professor: Michael Hammock
Term: Fall 2017
Tags: Economics, Macroeconomics, trade, and Property Rights
Name: Week 2 Notes
Description: These notes cover the material discussed during week two of the course. Topics included: positive and normative economics, fallacy of composition, tools of the economist, trade, property rights, law of comparative advantage, and economic organization.
Uploaded: 01/24/2018
3 Pages 27 Views 21 Unlocks
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