Macroeconomics_Week_1.pdf ECON 2105
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This 4 page Class Notes was uploaded by lez38440 on Sunday August 21, 2016. The Class Notes belongs to ECON 2105 at University of Georgia taught by McWhite in Fall 2016. Since its upload, it has received 6 views.
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Date Created: 08/21/16
Macroeconomics Week 1 Chapter 1 Economics: study of how people make choices and the study decisions in the presence of scarcity Economists: study how individuals, companies and the government allocate resources related to given wants • Scarcity being a limited amount of money or time • Regardless the circumstance there is going be some level of scarcity among resources, typically related to time. “Consequential Accountability Statutes” contains the idea that with every decision there may be an unplanned consequence that results. • Example: “No Child Left Behind” created an increase in the amount of students being diagnosed with ADHD; this occurred because these children were then exempt from the statistics. *5 Big Concepts: 1. Incentives: motivating factors that can have a positive or negative influence such as a reward or punishment a. Direct Incentives: Hopefully causes desired result b. Indirect Incentives: unexpected behavior c. Incentives and Innovation: incentives create economic growth. For example, patents and copyright laws guarantee inventors a specific period of time in which they can exclusively sell their work. This incentive drives innovators to create new things and reap heavy rewards. 2. Trade Offs: Whatever is given up a. Example: Choosing to go out with friends instead of studying. The trade off is the loss of studying and possible grade drop. 3. Opportunity Costs: “highest value foregone alternative” or “best thing given up”. So assume the best possible choice is made, the opportunity cost would be the benefit that would have resulted from the second best choice. 4. Making Decisions at the Margin: most decisions are incremental changes and not “all or nothing”. The idea is you stop when additional cost becomes greater than additional benefit. a. The optimal decision point is when Marginal Benefit meets Marginal Cost (MB=MC) 5. Trade Increases Total Value: Voluntary exchange of goods and services between two or more parties. Beneficial to both parties. a. Market: place to buy/sell goods i. Consumers typically leave with more stuff when trade occurs in a market place b. Comparative Advantage: “low cost producer” the situation in which an individual, business or country can produce at a lower opportunity cost than a competitor can Markets are about both Competition and Cooperation • Cooperate: by doing what person/company/etc. is good at and trading • Competition: by deciding who to cooperate with Chapter 2 Scientific Method is used to solve problems and conduct research • Create a hypothesis and testing it (gets rid of em otions) o We must deal with facts and remain objective Positive Economics: contain an analysis of situations armed with sufficient facts. The topics people do not argue about and typically considered to be true. Normative Economics: the “should be” topics. Normative Economics specify an objective function and determine methods to “fix/help” it. Very argumentative and goal oriented. Typically, we focus on the Positive Economics but normative is the fun stuff to argue about. We create a theory and try to explain the theory using models • A map is a model that is very simple, general and useful • We take models and our experience and apply them to new situations to see if the model fits Ceteris Paribus: Static analysis; the concept in which economists examine a change in one variable while holding everything else constant De gustibus non es disputandum: to each his own. The idea that everyone contains their own tastes whether others approve or not. “There is no accounting for tastes”
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