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Chapter 2 Lecture Notes- Microecon

by: Taylor Benavides

Chapter 2 Lecture Notes- Microecon ECON 201 Online, Stephen Haynes

Marketplace > University of Oregon > Economcs > ECON 201 Online, Stephen Haynes > Chapter 2 Lecture Notes Microecon
Taylor Benavides
GPA 3.0
Econ 201-Microeconomics
Stephen Haynes

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Week 2 Chapter 2 Lecture Notes.. Reviews Key Principles of Economics
Econ 201-Microeconomics
Stephen Haynes
Class Notes
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This 2 page Class Notes was uploaded by Taylor Benavides on Thursday April 9, 2015. The Class Notes belongs to ECON 201 Online, Stephen Haynes at University of Oregon taught by Stephen Haynes in Spring 2015. Since its upload, it has received 123 views. For similar materials see Econ 201-Microeconomics in Economcs at University of Oregon.

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Date Created: 04/09/15
Chapter 2 Key Principles of Microeconomics 1 Apply the Principle of Opportunity Cost 2 Apply the Marginal Principle 3 Apply the Principle of Voluntary Exchange 4 Apply the Principle of Diminishing Returns 5 Apply the Real Nominal Principle what you sacrifice to get something a curve that shows the possible combo of products that an economy can produce given that its productive resources are fully employed and efficiently used 0 Illustrates the principle of opportunity cost for an entire economy 0 If the resources in an economy are fully employed an increase in the production of wheat comes at the expense The additional benefit resulting from a small increase in some activity the additional cost resulting from a small increase in some activity Increase the level of an activity as long as its marginal benefit exceeds its marginal cost choose level at which marginal benefit equals marginal cost EXAMPLE The gov should make car emission standards stricter as long as the marginal benefit exceeds the marginal cost ie Savings in health care costs over the cost of additional equipmentextra fuel used wen two people makes both people better off EXAMPLE With a job you exchange your time for making money and your boss exchanges money for your labor Both sides are better off as result of this exchange Adam Smith stressed the importance of voluntary exchange as a distinctly human trait People are better off specializing in what they do best and the buying goods and services from someone else When an output is produced with two or more inputs and one input is increased while the other is fixed beyond some point the point of diminishing returns output will increase at a decreasing rate RELEVENT WHEN we try to produce more output in an existing facility by increasing the number of workers sharing the facility When a worker is added to a facility each worker becomes more unproductive due to the fact they have less space in the facility The workers share the same machinery etc and as more and more workers are added the total output increases but at a decreasing rate ONLY OCCURS when one of the inputs to the production process is fixed IF a firm can vary all inputs the principle is not relevant the face value of an amount of money the value of an amount of money in terms of what it can buy what matters to people is the real value of money its purchasing power not face value EXAMPLE Government officials use this principle when they make public policy such as Social Security payments and published statistics adjusted to in ation EXAMPLE Minimum Wage From 1972 to 2011 minimum wage increased from 2 to 725 Because prices increased faster than nominal wage real value actually decreased


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