Economics 222: Principles of Macroeconomics Week 1 Notes
Economics 222: Principles of Macroeconomics Week 1 Notes Economics 222
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This 3 page Class Notes was uploaded by Danielle White on Monday January 18, 2016. The Class Notes belongs to Economics 222 at University of South Carolina taught by Marian Manic in Spring 2016. Since its upload, it has received 73 views. For similar materials see Principles of Macroeconomics in Economcs at University of South Carolina.
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Date Created: 01/18/16
Economics 222- Principles of Macroeconomics January 13, 2016 Chapter 2 PPF- production possibility frontier (curved line) Outside of PPF, not feasible Inside of PPF, feasible but not efficient On PPF, feasible and efficient All points on the PPF line, represents efficiency o Because it maximizes resources Trade-off, gain more of product A, costs some of the resources used for product B Opportunity Cost: what must be given up in order to get a good o Slope of PPF= rise/run (y max/x max) o i.e. 30 Dreamliner/40 small jets, therefore the opportunity cost is ¾. When we produce 1 extra small jet, we must give up ¾ of a Dreamliner Economic Growth: the PPF shifts to the right, will not always shift proportionally, but the economy can produce more o Causes: 1. An increase in factors of production: resources used to produce goods and sources 2. Technology Factors of Production 1.Land includes natural resources, such as mineral deposits, oil, natural gas, water, and actual land acreage. 2.Labor is the mental and physical abilities of the workplace 3.Physical Capital is manufactured items used to produce other goods and services i.e. building and equipment 4.Human Capital is the educational achievements and skills of the labor force (which increase labor productivity) Theory of Comparative Advantage, it makes sense to produce the things you’re especially good at producing… and buy everything else from others o Comparative advantage January 15, 2016 A country has a comparative advantage in producing goods for which it has the lowest opportunity cost o They should specialize in that production Slope of PPF= y2−y 1 x2−x 1 Absolute Advantage: a country can produce more output per worker than other countries Circular-Flow Diagram First Flow Households gives factors to factor market Factor Market gives factors to firms Firms give goods and services to Markets for goods and services Markets for goods and services gives goods and services to household Second Flow Household gives money to Markets for goods and services Markets for goods and services gives money to Firms Firms give money to Factor Markets Factor Markets give money to households Positive Economics is the branch of economic analysis that describes the way economy actually works o About description Normative Economics makes prescriptions about the way economy should work o About prescription Chapter 3 Supply and Demand P, price, on y-axis Q, quantity, on x-axis Law of Demand: When Price increases, quantity demand decreases When Price decreases, quantity demand increases
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