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AAEC notes: week 1

by: Shayna M

AAEC notes: week 1 AAEC 1006

Shayna M
Virginia Tech
GPA 4.0
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About this Document

Everything in bold and hi-lighted are important for exam 1.
Economics of the Food and Fiber System
Dr. Mike Ellerbrock
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This 3 page Class Notes was uploaded by Shayna M on Sunday September 18, 2016. The Class Notes belongs to AAEC 1006 at Virginia Polytechnic Institute and State University taught by Dr. Mike Ellerbrock in Fall 2016. Since its upload, it has received 6 views.


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Date Created: 09/18/16
AAEC 1006 8/24  Marginal- The effect of doing something one more time  Economics- The study of choice (how rational people make wise choices) and the study of value (where does value come from? It’s situational. If you’re in the desert, water is more valuable than diamonds)  Diamond-Water Paradox- if water is essential, why are diamonds so much costlier? o Scarcity and rarity- Scarcity alone doesn’t automatically increase value o Cost DOESN’T equal price o Value lies at the margin o Everything in life is DMU (diminishing marginal utility) dependent and everything displays it o In America, the PRICE of water is low because it’s plentiful, but we don’t buy many diamonds because they are rare and have a higher price o You have to compare the first glass of water you get to the first diamond you get to set the value o The value of anything depends on which unit you are talking about o Example: Olympians train year round, but only see their families one day a year. What COST have they paid? AAEC 1006 8/24  Opportunity cost- for gone net benefits from not doing the second best thing; ONLY SECOND BEST nd o The cost is the price and what you lose by not doing the 2 best choice o Example: How much does it cost to go to VT? 1. Tuition $15000 2. Indirect costs: apartment, utilities, gas, groceries $10000 3. Opportunity costs- if you could earn $20,000 by working instead of going to college, then you made a $45,000 decision 4. However, if at the job there was a $500 uniform and $500 parking pass, the opportunity cost would be $19,000  What is the cost of war? We set aside $5 billion a year o There are also reparations, cost of losing soldiers, helping disabled veterans, cost of manufacturing weapons…. o What if we drop and outdated bomb that was $10,000 20 years ago, should it be included in the cost of war this year?  No, it is considered cleaning out the closet  If someone hits your car and totals it, do they owe you a new car? No, they owe you a used car because if you were driving the car it’s used.  Grace has 2 boyfriends, both propose, how many choices does she have? o She has three choices 1. Boyfriend 1 2. Boyfriend 2 3. Staying single  If she decides to marry boyfriend 1, what’s her opportunity cost? o Her opportunity cost is her 2 best choice. The 3 choice is irrelevant. o Time with the other boyfriend is a sunk cost, also irrelevant.  If your car breaks down, and the part to fix it is $1200, should you buy it? Only if you’ll get $1200 use out of the car afterwards.  Cardinal number- How many of something there are, there are no fractions or decimals o There are 1, 2, 3… coins  Ordinate number- Is an opinion, and doesn’t tell how much. o Bananas are my second favorite fruit AAEC 1006 8/26  Property and possessions raise in value – appreciate (ex: You buy home owners insurance above the price you pay for the house, because they typically raise in value)  Machinery depreciates because it tends to break down faster than structures and other things (ex: after driving a new car home, it loses value)  Wheat and Corn – opportunity costs  You give up a little corn to make more wheat, the more you make of one, the more you give up of the other o A- Inefficiency: not producing enough of either product o B- choice: can produce b or c o C- choice: can produce b or c o D- Scarcity: we don’t have enough input to produce that much output o D- Growth: outward shift in the curve o PPC’s are concave to the origin because not all inputs for one area is equally as efficient for other areas, concave because of increasing opportunity costs  NOT convex- it would be great if you did more of one thing and the opportunity cost for the other decreased, but that doesn’t happen  Economic growth means more of everything o It’s wrong to say more of one thing but less of another is growth, more of both


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