Week 1 Notes
Week 1 Notes Econ 1015
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This 2 page Class Notes was uploaded by Nathan Kolker on Friday August 28, 2015. The Class Notes belongs to Econ 1015 at University of Missouri - Columbia taught by Dr. Lee in Summer 2015. Since its upload, it has received 91 views. For similar materials see Macro Economics in Economcs at University of Missouri - Columbia.
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Date Created: 08/28/15
ECONOM 1015 Week One Lecture Notes We have many wants thus we have lots of scarcity Macroeconomics deals with how scarcity affects a collection of people interacting with one another Nations only have a finite amount of money to spend to satisfy the country We are going to discuss how we will make decisions to maximize the welfare of a nation The word economy is derived from the Greek name Oikonomos one who manages a household Household will be denoted as HH in this course A reward encourages a choice A penalty discourages a choice Change in costs or benefits alter the incentives and changes people s decisions Rational Choice Uses the available resources most effectively to satisfy the wants of the decision maker at the time of the decision Example choosing a restaurant to eat at 0 You choose the restaurant 0 You choose the dish to eat I Two versions of cost benefit analysis Rational choices may vary for each decision maker because each decision maker is looking for the most personal satisfaction The decision you make can be wrong but rational choices deal with how you feel at the time of the decision So everyone makes rational choices by acting how they feel Opportunity Cost I What you are giving up when making your decision The highest value alternative I Everyone has financial constraints through opportunity cost and tradeoffs Since companies organizations and people have limited resources but unlimited wants everyone must prioritize for an efficient outcome Efficiency vs Equity I Efficiency is when society gets the largest quantity of something considering the scarcity of resources I Equity is when resources are distributed fairly among citizens I You can either focus on Efficiency or Equity Positive vs Normative Statements I A Positive Statement is a statement that can be proved true or false after examining data The peanut butter sandwich is larger than the turkey sandwichcan be tested ECONOM 1015 Week One Lecture Notes I A Normative Statement is a value judgment and proposal based on how the world should be The peanut butter sandwich tastes better than the turkey sandwichpersonal preference Four Macroeconomic Goals I Grow Economically we would rather be an unhappy rich country than an unhappy pour country I Full employment finding a job that suits your education rather than having college educated citizens working minimum wage jobs I Stable prices helps a financial plan I Sustainable balance of trade Without a financial system we cannot accomplish these goals We need financial markets and intermediaries as well as monetaryfiscal policy through the fed tax interest rates Absolute Advantage Who produces more given the same amount of time or constraints
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