Econ 201 Chapter One Topic One Notes
Econ 201 Chapter One Topic One Notes ECON 201
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This 8 page Class Notes was uploaded by Randi myers on Monday August 31, 2015. The Class Notes belongs to ECON 201 at University of Tennessee - Knoxville taught by Dr. Ken Baker in Fall 2015. Since its upload, it has received 30 views. For similar materials see Intro to Economics in Economcs at University of Tennessee - Knoxville.
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Date Created: 08/31/15
Econ Chapter 1 Topic 1 Baker 83115 215 PM Game theory study of how people behave in strategic situations 0 Application zappos and the 2000 offer 0 new employees offered 2000 Take 2000 and leave bad employee Turn down on board with company loyal 0 Government regulation political decisions making Scarcity The condition in which wants are forever greater than the available 0 Condition in which there is not enough of something available if it were provided for free 0 Time is scarce 0 Only so many hours in the day 0 Income revenues are scarce 0 Only so many dollars in your paycheck 0 Only so much revenue for business 0 Government revenue is scarce 0 Only so many tax dollars Society39s problem 0 Economist see a irreconcilable problem 0 Human One of the most fundamental economic assumptions Human want is unlimited 0 Our ability Another fundamental economic assumption Resources are limited scarce 0 Resources the inputs used to make the goodsservices that individuals and society desires 0 Raw materials land coal timber iron water fossil fuels 0 Labor time of workers 0 Physical capital humanmade goods used to make other goods equipment machinery 0 Human capital experience training education of labor force 0 Entrepreneurship ability to organize other inputs to take the risk 0 Technology method of turning inputs into output o All of the resources are scarce 9 not enough to satisfy everything that people want 0 Fundamental Problem Our Fundamental Problem Resoumeisaw Materials Labor lumberironcoppercrude oiletc timeeffortenergy Physical Capital Hurnan Cagitai man made goods experlenceEducatlon I Hopper some economic system 1 Govt Provided Services roadseducationdefenseetc medical carecar maintenancehaircutsetc quot Goods shoesjeansfoodetc 0 top physical capital resourcesraw materials labor and human capital scarce 0 bottom goods services and government provided unlimited goods vs service 0 good tangible product with some physical dimensions 0 services intangible products that cannot be weighted or measured US economy 0 Goods 20 0 Service 80 Questions for society 0 What 0 How many How many acres of corn do we plant How many SUVs How many tanks 0 How 0 What is the best combination of inputs to make the goodsservice 0 how do we 0 How do we divide u the goods series we made Who gets Bentley Who gets the ford Economic Pie 0 First two questions revolve around efficiency 0 How can we produce as much as possible with what we have 0 Third question equity Econ as a social science Normative o Concerned with how the work should be 0 Centered around moral ethical and subjective beliefs Government should ban medicinal use of marijuana o The government should raise the minimum wage Positive 0 Concerned with how the world is o Centered around factual testable and objective beliefs If the government increased the minimum wage by 10 unemployment with rise by 2 Micro vs macro Microeconomics 0 Study of choices facing individuals business and even government and their interactions Macroeconomics 0 Study of how the aggregate of individual decisions household firms and government affect an entire economy city state nation global Microeconomics 0 Price of any one thing 0 3 main economic agentsquot 0 households decisions 0 firmsindustries businesses have to make decisions I who to hire what to make 0 government 0 microeconomic studies the agents behavior and choices individually 0 studies interactions between these 3 groups 0 they all interact with each other Macroeconomics 0 Something that will affect every household Level of production 0 How can we measure and entire country s total level of production 0 How is this level of production related to income To unemployment Standard of living 0 What affects a country s standard of living The average level of consumption of goods services enjoyed by the population Cost of living 0 What is the cost of living and how is it measured Food mortgage bills etc Government policies 0 How can federal reserve or government policies affect you Policies in place that affect the entire country In Unemployment Methodology of economics 0 1 Identify and issue problem or question 0 form a question 0 2 Simplify using assumptions 0 assumptions serve to simplify the world complexity is by far the biggest problem economists face critical first step involves simplifying so that we focus on only those aspects critical to the particular problem often a subjective process which can lead to disagreements between economists common economic assumptions u people behave to maximize their happiness utility 0 choose based on maximizing happiness I businesses behave to maximize pro ts 0 choices are made based on maximizing profit n consumersfirms make wellinformed rational decisions 0 3 Develop working model theory 0 Theories generalized causal relationships between variables Often based on observations educated guesses or expe ence Attempt to n Explain past phenomenon n Predict future occurrences Pitfall don t confuse correlation with causations n Ex just because it rained when vols doesn t mean the rain caused the win 0 models quantitative representation of the issue being examined models can represent consumers businesses government supply and demand is the most important economic model Example a theory says that consumers buy more when coffee price falls n models says that consumers buy 8 more coffee when price falls by 5 4 Collect data and test the model 0 either reject the theory or fail to reject it What do economists do 0 Economics is clearly a broad topic that can be applied to a wide range of subjects 0 Pollution poverty health care trade sports 0 Can apply to anything else in life 0 Where do economists work 0 Academia Teach students the tools to think economically about decisionmaking Research expand economic theory 0 Private sector O Industries such as finance insurance as consultants to businesses Public sector Federal state and local governments analyzing weighing policy Topic Overview 0 Key terms 0 O O O Scarcity Resources Economics Positive vs normative language Keyideas O Societys 2part problem there aren t enough resources to produce the amount of goods and services that would fully satisfy everyone Microeconomics examines behavior of individual decision makers Macro economics examines the aggregate outcome of many individual decision makers Assumptions serve to simplify a problem before examination Theories provide causal relationship between variables while models allow for quantitative predictions 83115 215 PM 83115 215 PM
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