Microeconomics Week 1 Notes
Microeconomics Week 1 Notes ECON 2023
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This 3 page Class Notes was uploaded by Riley Goodman on Tuesday February 2, 2016. The Class Notes belongs to ECON 2023 at University of Arkansas taught by Jeffrey Cooperstein in Summer 2015. Since its upload, it has received 34 views. For similar materials see Principles of Economics: Microeconomics in Economcs at University of Arkansas.
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Date Created: 02/02/16
Economic Thinking Wednesday, December 2, 2015 2:01 PM Fundamental Economic Concepts: 1 Scarcity - People have unlimited wants to be satisfied by limited resources 2 Opportunity Cost - The sacrifice made to attain something rather than another thing (A.K.A. Trade-off) Types of Resources: Land - Unaltered nature Labor - Human power Capital - Used to make something Entreprenurialability - Ability to combine land, labor, and capital to conduct business Utility - Level of consumer satisfaction, generalization, cannot be measured Economic Thinking: Positive - Price of things, hard facts o Can be inaccurate Normative - Putting value judgement on items or ideas o Opinions can change based on new information Good Economic Thinking: Scientific Method Assume nothing Support claims with data Cost-benefit Analysis Marginal Analysis Micro vs. Macro Bad Economic Thinking: Bias - Preconceived Notions, prejudices, etc.… Loaded Terminology - Name calling, defamation Fallacy of composition - What's good for the part may not be good for the whole Post hoc fallacy - "A" happens before "B", but "A" may or may not have caused "B" Correlation not causation - What causes what, correlations may not be causations Production Possibility Model (Middle Line is Curved) *Because of exponential effect of use of capital goods* Consumer Goods *An outward expanding PPC Curve indicates more production in an economy.* *A receding PPC Curve indicated a lower level of production in an economy.* A change in any of the four resource categories (Land, Labor, Capital, Entrepenuerability) can affect the direction of the PPC shift. Examples: An increase in worker competency (Labor) can expand the PPC line. However, a decrease in the working population (Labor) can cause the PPC Curve to recede. Better factory technology (Capital) can expand the economy. War that destroys factories (Capital) can shrink economic activity. Optimal Allocation : Point on PPC that provides greatest utility to consumers. Utility - Level of satisfaction in consumer o Utility is difficult to measure and quantify because there is no standard MC = MB (Marginal Cost = Marginal Benefit) Fungible - Distinct, unchanging, exchangeable, universal value. Marginal = Incremental *Graphs never fully explain an idea, there are exceptions in which graphs don't tell the entire story* Historically, a nation that produces more capital goods than consumer goods will grow at a quicker rate. However, once that nation begins to produce more consumer goods, the rate of growth slows.
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