Econ 202 week 2 notes
Econ 202 week 2 notes ECON 202
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This 0 page Class Notes was uploaded by Leslie Pike on Thursday February 4, 2016. The Class Notes belongs to ECON 202 at Western Kentucky University taught by Dean Jordan in Spring 2016. Since its upload, it has received 23 views. For similar materials see PRIN ECONOMICS-MICRO in Economcs at Western Kentucky University.
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Date Created: 02/04/16
Week 2 notes Econ 202 Ef ciency means that you are producing the most product for the lowest price Globalization refers to international trade and to US companies using foreign labor We live what is called an quotinformation age economyquot phones internet etc The globe is supposedly heating up not going to debate that in an Econ class just assuming that it supposedly is Coal and gasoline are supposedly heating up the atmosphere However these sources are much cheaper than solar wind etc Outlawing fossil fuel would reduce carbon emissions but drive up the cost of electricity and put people out of work Once again we are faced with a tradeoff Is it worth it The recession in 2008 was caused by economic instability caused by banks lending too much money People borrowed money to buy houses etc because it seemed like they would have unlimited resources However the whole quotunlimited wants limited resourcesquot principle cannot be thwarted for long without having undesirable consequences such as recessions When you make a choice the bene tis what you gain and the costis what you give up The rationachoice is the choice that offers YOU the greatest bene t at the least cost What is a rational choice for you might not be a rational choice for the next person It depends on your preferences your likes and dislikes For example Dr Jordan doesn39t like Brussel sprouts but he likes pizza Opportunity cost is the cost of the highest valued alternative that must be given up to get what you wantneed most This quotcostquot is not necessarily monetary A choice does not have to be allornothing You can choose to spend part of your free time studying and part of your free time playing video games Say you increase the amount of time you spend playing video games You get a marginal bene t you have a certain amount of more fun and a marginal cost your grade drops by a certain amount because you didn39t study enough There are two different types of statements positive and nominative A positive statement is a statement of fact ie quotDr Jordan has grey hairquot A nominative statement is a statement of opinion ie quotWe ought to spend more tax dollars on higher educationquot A Production Possibilitv Frontier PPF is used to demonstrate what quantities of what goods can and cannot be produced with your given amount of resources A PPF focuses on two goods or services at once There is a PPF in Chapter 2 of the textbook aboutJoe who owns a smoothie bar that produces salads and smoothies He has a limited amount of time and he has to decide whether to use it to make salads or smoothies and what division of his time is the most ef cient Production ef ciency means that you cannot produce one thing without giving up another thing For instance when Joe is blending a smoothie he can39t make a salad at the same time lfJoe can make a salad in the same amount of time he can make a smoothie his opportunity cost of one salad is one smoothie If he can make two salads in the amount of time he can make one smoothie his opportunity cost of a smoothie is two salads or the opportunity cost of a salad is 12 smoothie The opportunity cost increases the more of something you do Ex Your rst hour of studying is the most productive If you study all night you will get less productive as the night drags on Ex Drinking one beer won t give you a hangover you get the bene t with low cost But if you keep drinking beer you will get a hangover and be miserable If you drink even more beer you can get alcohol poisoning and go to the hospital The more you do of one activity the more expensive it gets Ex lfJoe quits making salads and only makes smoothies he puts more wear and tear on his smoothie machine and it breaks more often and he has to pay to x it driving up the cost of the smoothies By the same token the marginal bene t of doing something decreases the more of it you do You can only play one Xbox game for so long before you get bored and more on to the next one Allocative Ef ciencv means that vou cannot produce more of anv one thing without giving uo something else that vou value more hiClhIV The marginal bene t is equal to the marginal cost In layman39s terms you have found your happy medium between studying and having fun between pizza and cola between salads and smoothies etc
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