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ECNS 101 Week 2 Class Notes

by: Bronwyn

ECNS 101 Week 2 Class Notes ECNS 101IS-001

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About this Document

Notes from 9/6 and 9/8
Economic Way of Thinking
Holly Fretwell
Class Notes
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This 2 page Class Notes was uploaded by Bronwyn on Thursday September 15, 2016. The Class Notes belongs to ECNS 101IS-001 at Montana State University taught by Holly Fretwell in Fall 2016. Since its upload, it has received 61 views. For similar materials see Economic Way of Thinking in Economics at Montana State University.


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Date Created: 09/15/16
9/6:  ● Production Possibilities Frontier (PPF)  ○ Country produces 2 goods  ■ Consumption goods = goods consumers use  ■ Capital goods = goods to produce other goods  ○ Amount of goods that can be produced  ■ Set time, given resources, constant technology  ○ Assumptions  ■ Only 2 goods  ■ All resources used efficiently  ■ quantity/quality  ■ **changing assumptions shifts curve  ○ Increase production capacity (rightward shift)  ■ Invest  ■ quality/quantity  ■ Change rules/institutions  ■ Increase GDP (gross domestic product)  ○ Linear graph = constant opportunity cost  ○ Negative slope = production of one good only increases if production of other  decreases  ○ Ex:    9/8:  ● Opportunity cost is largest cost of college  ○ Saving vs college  ■ Direct costs, forgone earnings, monetary benefits  ● Inflation ­ a general rise in prices  ● Interest ­ opportunity cost to spending  ○ Education  ○ Future value  ■ Simple = interest only on principal  t  ● FV = PV + PV(i)​ ■ Compounding = interest on principal and earned interest  t  ● FV = PV(1+i)​ ● Annuity = continual payment of principal annually  ● Trade gains  ○ Comparative advantage is the one that matters  ● A person’s riches ≠ someone else’s loss  ● Person gains wealth through  ○ Trade  ○ Coercion  ○ Inheritance  ○ Fraud  ○ Government granted privilege  ● Society exists because there are gains from cooperation and trade  ● Economic systems  ○ Socialism ­ productive resources publicly owned and allocated  ○ Capitalism ­ productive resources are privately owned and allocated  ■ Market system allocates by price  ● Trade ≠  0 sum game  ○ Lowers opportunity cost  ■ Division of labor  ○ Individuals engage in trade and respond to incentives  ○ Individuals compete for enrichment in market economy  ○ Consumers choose by purchasing products  ● Production independence 


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