Week 2 Notes
Week 2 Notes Econ 1015
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This 4 page Class Notes was uploaded by Nathan Kolker on Sunday September 6, 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 99 views. For similar materials see Macro Economics in Economcs at University of Missouri - Columbia.
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Date Created: 09/06/15
ECONOM 1015 Week 2 Opportunity Cost To find opportunity cost find how much you are giving up for one unit of something When comparing two relative tasks the opportunity costs are the reciprocal of one another Comparative Advantage Goes belongs to whomever has the lower opportunity cost A country nation firm or person can have comparative advantage You can have absolute advantage on two tasks but comparative advantage can only be with one of the relative tasks If one person firm country or nation is worse at both tasks you must find which task they are relatively not as bad at That is their comparative advantage The price range to sell one of the tasks must be between both country s firms persons etc opportunity costs Autarky When the nation is economically independent lack of trade Gains from Trade The difference of price charged and the provided service s opportunity cost Consumption with trade should always be greater than the consumption in Autarky Both parties are better of with trade 0 Standard of livingtotal welfare always increases with trade according to economists Factors of Production Physical space that comes with land and things deposited unto the Earth iron crude oil trees 0 Referred to as land by average citizens Referred to as natural resources by economists Paid through rent Land is the space and everything that comes in it Renewable Resources water trees NonRenewable exhausted resources include crude oil iron ore I Not returning in our lifetime 0 Fixed Resources actual land ie state of Florida Wagemoney paid for labor 0 Labor refers to both the amount of work and time worked toward producing something 0 Human Capital OOOOO ECONOM 1015 Week 2 I How good the labor is and how many skills the workers have from training school or experience Wages change differ based on how much human capital one has Interest paid capital 0 Equipment physical that will be used over an extended period of time to create other products or produce services Example lecture hall building used to increase educated citizens 0 Profit 0 How much capital one nation firm has at a given point of time Selling producing goods and services through combining resources and taking risks All employees are factors in producing an output For example a janitor is a factor of producing education as an output Production Possibility Frontier PPF Curve representing the entire economy s production To have PPF the country must have laws customs conventions policies and a stable political climate Must have efficient use of resources Technology available must be efficiently used Production of one good must be reduced to increase production of another good opportunity cost Standard of living improves when resources are allocated appropriately Inside PPF is when things are not right Outside PPF is not possible With labor market discrimination we will not efficiently use resources 0 Jobs giventaken away from people because of race gender age etc Not based on qualifications 0 Less pay for same work means workers will not try as hard Will not provide as much Expansion of economic growth More resources Economic Growth 0 Ability to produce more goods and services Happens when physical capital and technology improves 0 Better equipment education training better faster resources Productivity How much of a goodservice is produced per hour ofa worker s time Directly related to standard of living ECONOM 1015 Week 2 Economic Growth Extensive Growth 0 Morenew resources accumulated 0 Example Purchase of Hawaii Intensive Growth 0 The resources we already have improve in quality 0 Example Farming GPS Analyzing that we didn t have before New way of thinking better use of resources Marginal Cost Opportunity cost of producing one more marginal unit of a good service Upward sloping on a graph Preference Described in Economics as likes dislikes that can change over time Marginal Benefit Benefit of the consumption of one more good Marginal benefit of each new piece product is less than the piece product consumed prior Example water bottles in the Desert The first bottle of water means more when you are thirsty than your second bottle of water Slop of Marginal benefit for consume is decreasing When the marginal benefit and the marginal cost cross that determines how much is produced This is allocative efficiency Productive Efficiency We are using all resources Technical Efficiency We are using the best technology possible Economical Efficiency The point that productive efficiency Technical Efficiency and Allocative Efficiency are all achieved together Economic Coordination Allocating resources based on decisions of firms and households Price is used as an incentive Grouping individual markets together Aggregation Micro Market Individual Firms Macro Market Aggregating all of the firms ECONOM 1015 Week 2 Property Rights Rules on who has control on certain resources Different arrangement depending on country Example USA N Korea have different rules Real Property Land houses buildings hair blood Financial Property Money bank accounts retirement 401k stocks Intellectual Property Product protected by copy rights patents 0 Books music film software When property rights are not enforced by the government the nation ends up producing inside the PPF Eminent Domain Government can take away private property for necessary public use Example Building highways railroads A firm is an entity that hires and organizes inputs to produce goods service Production is the act of taking resources and making them goods and services Money Price Amount of money charged and paid in exchange for a good or service Relative Price Opportunity cost of buying a good or service Economists use this price Demand for a good D Described in relationship between price and quantity Demand when everything else is held constant Ceteris Paribus Price Household s marginal benefit maximum willingness to pay Quantity Demanded Price at a given point in time
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