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This 4 page Class Notes was uploaded by Alexis Magallanes on Monday February 1, 2016. The Class Notes belongs to ECON 2303 at University of Texas at El Paso taught by Nathan Ashby in Winter 2016. Since its upload, it has received 33 views. For similar materials see Principles of Economics in Economcs at University of Texas at El Paso.
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Date Created: 02/01/16
Climate of Change SEGMENT I ECONOMICS DEFINED a) RESOURCES a. Land: i. Ground 1. (earth, sand, rocks, pebbles, dirt) ii. Natural Resources: 1. (copper, oil, sugar, gold, coal, silver) iii. Other Natural Resources: 1. (water, vegetation, trees, bushes, shrubs, parks, air, sun) b. Labor i. people c. Capital i. machines d. Entrepreneurship i. knowledge b) SCARCITY a. Resources are scarce: there is not enough resources to satisfy everyone’s wants simultaneously. Additionally, once they are selected to be used for a particular productive activity, they are not going to be available to be used in some other fashion. i. How to satisfy wants in the presence of scarce resources c) WANTS/NEEDS a. Wants are desires b. Needs are necessities c. Wants are always greater than needs (there are more wants than needs) d. Needs are finite e. Wants = actual goods and services (i.e. food, clothes, computers, etc.) d) WHAT, HOW, WHOM a. Whom i. Whom are we producing for? 1. Distribution of goods and services 2. Who gets what is based on income. 3. Goods and services will purposefully be based off income 4. Mass produced goods are affordable to both rich and poor\ ii. Whatever decision we make, when tied to scarcity, one group, whether rich or poor, will be denied a good or service. b. How i. How are we going to decide what we are going to produce? 1. Capital-to-labor ration: (Capital/Labor) a. More capital than labor = capital intensive production process i. This process typically produces goods such as Climate of Change 1. Cars / trucks / airplanes / computers / b. More labor than capital = labor intensive production process i. This process typically produces goods such as 1. Fruits /vegetables / clothes / shoes c. What i. What are we going to produce? 1. Guns or Butter a. Societies need to ask themselves more guns (military goods) or butter (everyday goods) e) OPPORTUNITY COST a. Goods and services are allocated at an opportunity cost i. Is the best forgone alternative ii. The next best alternative that is sacrificed iii. “trade-off” iv. What’s given up in order to achieve something else v. “There’s no free lunch” THE PRODUCTION POSSIBILITIES FRONTIER(PPF) a) Definition of the PPF a. The Production Possibilities Frontier i. A curve that shows the various combinations of the total output of two goods for an economy at a particular point in time. This time from is for e.g. 1 year. b) Assumptions of the PPF a. Resources must be fully employed i. Since we have scarce resources, we need to use them to their fullest capacity 1. 1 unit of labor = 1 human being 2. Full employment of labor = 40 hours a week ii. Resource inputs are fixed over this time period 1. In any given moment in time, you have a fixed amount of resources to work with 2. This is a static analysis that resource inputs are fixed iii. Technology is fixed over this time period 1. Technology is a new way of doing things 2. It is also a process that we use to combine the resources to produce the output 3. Technology: is the underlying process that’s used to combine resources in a suitable fashion to produce goods and services iv. The law of increasing opportunity cost 1. Embodied in the PPF is the law of increasing opportunity cost Climate of Change a. When we produce goods and services they come at an opportunity cost b. The opportunity cost is not constant, that is why the PPF is curved c. Each time you produce more of one than the other, the cost continually increases (i.e. for every TV produced, more fridges are not made exponentially; the cost in lost fridges is never the same, it increases) d. The more of one good that’s produced, the more of the other good that’s sacrificed, such as that there is less of the other good available each time. Hence the opportunity cost increases the more of one good that is produced. e. If you have a fixed quantity, it’s going to be shown as a movement along the curve v. Production takes place at a particular point in time (i.e. 1 year) c) Attributes of the PPF a. Attainable region i. Attainable region is all points that lie on or within the curve of the PPF ii. The attainable region is your boundary set (set of possibilities) b. Unattainable region i. The area outside the PPF curve that is beyond the limit of the current boundary set (possibilities) of production due to lack of resources or technology or both c. Inefficiency i. Any point that is within the curve, but not on the curve. Violates the assumption that we are using our resources 100% efficiently (i.e. not working 40 hours, not using available labor, unemployment rate) ii. We want to be on the curve (efficient) iii. If you are on the curve, you are operating efficiently. If you operate efficiently, you can grow economically. d) Law of increasing opportunity cost-Detailed i. When we produce goods and services they come at an opportunity cost ii. The opportunity cost is not constant, that is why the PPF is curved iii. Each time you produce more of one than the other, the cost continually increases (i.e. for every TV produced, more fridges are not made exponentially; the cost in lost fridges is never the same, it increases) iv. The more of one good that’s produced, the more of the other good that’s sacrificed, such as that there is less of the other Climate of Change good available each time. Hence the opportunity cost increases the more of one good that is produced. v. If you have a fixed quantity, it’s going to be shown as a movement along the curve e) Consumption trade-off a. Trade-off between current consumption and future consumption i. When you use resources, you give up current consumption ii. This comes at a sacrifice 1. Ex: buy a cheap car now to pay for college to make more money. Use that money later to buy a new car. iii. Development of technology today = more production in the future iv. If we stay are current technology, production will maintain for today, buy be lower in comparison to what we would have had in the future. v. Sacrifice today, have more tomorrow! GRAPHING a) Linear functions (1)Intercepts (a)X and Y intercepts (horizontal and vertical / quantity and price) (2)Downward sloping function (a)–mx+b (3)Upward sloping function (a)mx+b b) Non-linear functions (1)Definition of a polynomial function (2)Definition of a quadratic function (3)Graph of a quadratic function (a)A parabola (y=ax / y =-ax )2 (4)A parabola opening up and its applications in economics (a)U-Shape Curve (5)A parabola opening down and its application in economics (a)Inverse U-Shape Curve
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