Popular in Macroeconomic Theory I
Popular in Economics
This 3 page Class Notes was uploaded by Amor Notetaker on Friday October 14, 2016. The Class Notes belongs to ECO 1500 at SUNY Purchase taught by Dr. Palagashvili in Fall 2016. Since its upload, it has received 4 views. For similar materials see Macroeconomic Theory I in Economics at SUNY Purchase.
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Date Created: 10/14/16
MacroEconomics ECON 1500 Week 1 1. General Info a. Praxeology- study of human action and social interaction; there are two branches of this i. Economics- is WHY it would happen ii. History- is WHAT happened b. Economics-the study of how ppl make decisions and how they interact with each other c. Once we understand why we can solve the puzzle of economics 2. Hockey Stick of Economic Growth a. Most of the world for most of human history lived poverty b. Until recently history has remained stagnant until a sudden up rise in wealth (causing the hockey stick figure) 3. Scarcity a. Fundamental economic problem of having unlimited human wants in a world of limited resources 4. Principles a. Incentive Matters i. Incentives are rewards or punishments in order to moderate behavior b. Good institutions can align self-interest with the social interest i. Institutions- a set of rules of society ii. If there are good institutions there can be a positive effect on economic growth c. People face trade-offs i. Scarcity leads to choice; which leads to a tradeoff may not always be money it could also be time ii. Opportunity Costs- what must be given up to obtain something; if taking one path when given the choice of two what would be the costs of sacrificing the path not taken iii. For example: 1. A young athlete is recruited right out of high school to play in the major leagues. His first contract would gain him an automatic 4 years on the team plus an average salary of roughly $300 k per year. But because he is graduating high school he also has the opportunity to go to college on a scholarship that would cover his tuition for all 4 years. a. If he chooses to go to college instead of taking the major league contract what would he sacrifice, or what would be the opportunity costs? d. People think on the margin i. Marginal changes: small adjustments to a plan of action e. Trade can make everyone better off i. If you want to consume the things you want there is an exchange (can be of money, time, goods, or services) f. Institutions Matter i. Good institutions=good economic growth g. Business Cycles cannot be avoided but can moderated h. Prices rise when government prints too much money i. Central Banking is a hard job 5. Market a. Market- groups of buyers and sellers of a particular good or service b. Demand- the amount the consumer/community would want c. Law of demand i. The quantity demanded of a good falls when the price of the good rises 1. There is an inverse relationship between the two d. Determinacies of demand- reason for shift in demand i. Income 1. Normal goods and things that you may want to buy more of when your income increases 2. Inferior goods- things that you would buy more of when your income decreases ii. Price of related good 1. Substitutes a. When a fall in the price of one good reduces the demand for another i. Ex------ if the price of an iPhone decreases the demand for android would decrease b. Compliments i. When a fall in the price of one good raises the demand for another good 1. EX------ Peanut butter and Jelly, when the price of peanut butter falls the Demand for jelly rises c. Taste and Preferences d. Expectations i. What you expect in the price of the good to occur e. Population/# of buyers i. More buyers = greater demand e. Demand- a schedule or curve shows the relationship between the price of a good and the quantity demanded f. Quantity demanded- movements along the demand curve i. The amount of a good that buyers are willing and able to purchase Variable Change in variable Price of good itself Represents movement ALONG the demand curve Income SHIFTS the demand curve Normal good: Increase income, increase demand Inferior Good: increase income, decrease demand Price of Related Good SHIFTS demand curves Substitute goods: Increase of P of x increase of D of Y Complement goods: Decrease in P of X increase of D of Y Taste and Preferenece Shifts demand curve Expectations Shifts the demand curve Higher price tomorrow; increase demand today Lower price tomorrow; decrease demand today Population/Number of Shifts demand Curve Buyers Increase buyers, increase demand Fall of buyers, decrease demand g.