Econ 201 Lecture & textbook ch 1. notes
Econ 201 Lecture & textbook ch 1. notes Econ 201
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This 3 page Class Notes was uploaded by Kelsey Voelker on Thursday September 15, 2016. The Class Notes belongs to Econ 201 at Towson University taught by Professor Baejter in Fall 2016. Since its upload, it has received 44 views. For similar materials see Microeconomics in Economics at Towson University.
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Date Created: 09/15/16
Microeconomics 9/6/16 Special topic 2 Social Security How it works o “Pay As You Go” system o F.I.C.A on pay stub o You pay money for the retired’s social security checks o I.R.A- independent retirement account Company takes your money and invests it in order to better/increase your account Stocks & bonds Stocks are investments in shares of a company Can increase/change faster Bonds are “IOU’s”- you pay a certain amount and later get the same amount back plus some interest In bankruppcy stock holders get paid back first The Demographic Problem o not enough current young workers to pay for the Baby booming generation of retired now o the numbers of generations are not working out in different populations What about the “Trust Fund” o When the Federal government takes money from social security for other things—they give them special bonds to replace it for the time being which has become known as the trust fund o Some people say “social security isn’t in trouble because the trust fund can take us all the way to 2042” o Others say that there is no real money in the trust fund…so we are in trouble o *The trust fund is a meaningless fiction What to do o They could increase current working taxes o Or they could cut off people who have had “enough” social security o Plans to phase out the system Social Security Video A plan from Chile that made the elderly rich You accumulate your own fund in a pension Economics Chapter 2 Textbook notes Chapter 2: some tools of the economist Opportunity Cost Very subjective You decide what is the best alternative use of those resources Depends on how the decision maker values his/her options Opportunity Cost and the Real World There are examples of this is in real world such as making decisions like going to college or not Making a decision based on the options, how you are feeling, etc. Trade Creates Value value is subjective 2 aspects: o 1. When individuals engage in a voluntary exchange, both parties are made better of o By channeling goods and resources to those who value them most, trade creates value and increases the wealth created by a society’s resources. Transaction Costs—a barrier to trade The costs of the time, efort, and other resources necessary to search out, negotiate, and conclude an exchange High transaction costs can be a barrier to potentially productive exchange Reductions in transaction costs will increase the gains from trade *the internet has significantly lowered transaction costs The middleman as a Cost Reducer provide buyers and sellers information at a lower cost and arrange trades between them. Without this—many trades would never happen The importance of property rights Involve three things: o The right to exclusive use of the property o Legal protection against invasion from other individuals who would seek to use or abuse the property without the owner’s permission o The right to transfer, sell, exchange, or mortgage Four incentives for private owners: o Private owners can gain by employing their resources in ways that are beneficial to others, and they bear the opportunity cost of ignoring the wishes of others o Private owners have a strong incentive to care for and properly manage what they own o Private owners have an incentive to conserve for the future— particularly if the property is expected to increase in value o Private owners have an incentive to lower the chance that their property will lcause damage to the property of others Production Possibilities Curve People try to get the most from their limited resources by making purposeful choices and engaging in economizing behavior Shows the maximum amount of any two products that can be produced from a fixed set of resources, and the possible trade-ofs in production between them.