Econ 2101-008; Chapter 2; Week One and Two!
Econ 2101-008; Chapter 2; Week One and Two! Econ 2101-008
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This 8 page Class Notes was uploaded by Meredith P. on Monday September 7, 2015. The Class Notes belongs to Econ 2101-008 at University of North Carolina - Charlotte taught by Per Norander in Summer 2015. Since its upload, it has received 45 views. For similar materials see Priciples of Economics- Macroeconomics in Economcs at University of North Carolina - Charlotte.
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Date Created: 09/07/15
8/26- Econ 2101: Ch. 2 Notes Definitions: Economics: A social science in how limited resources (scarcity) and unlimited human wants forces us to make choices and trade-offs o Social: All about the people; human behavior/interactions o Science: Investigating theories and hypothesis; proving whether or not false o Limited Resources: Things are available in finite quantities o Unlimited human wants: we always want more stuff o Trade-Offs: In order to have more of one thing, you must give up another (sacrifice) Microeconomics: The choices of individuals ; resources include wealth/time Macroeconomic Resources: Aggregate choices (the sum/total of many choices) o Main Three: Land: Soil, freshwater, oil, gold = natural resources Labor: Human skills or human capital Capital: NOT MONEY! It’s machinery, factories, tools and equipment; “Things used to make other things” o Additional Resources: Technology: Ways to improve/combine land, labor, capital Entrepreneurship: Risk-takers in business; create new ways of combining land, labor, and capital. Examples are Steve jobs, John Rockefeller, Andrew Carnegie. Opportunity Cost: The next best alternative use of a resource; must be forgone to have more of something else. o Refer to the idea of “no free lunch”. Example, your parents come into town and agree to take you to lunch BUT they tell you how you need to get good grades/a job/etc. Also, you are using your time which is an individual resource Hypothesis Testing: Try to prove if false; if the findings refute the hypothesis, then it is rejected Ceteris Paribus: “All other things equal”. Example given by instructor: The department store Belk leaves Charlotte. As a result of Belk leaving, people will lose their jobs. **Ceteris Paribus is achieved as long as nothing else changes** Positive Statements: Focus on what will happen; based on theory or past experiences; fact based Normative Statements: What should happen; based upon values and beliefs; opinion based 8/31 Ch. 2 Continued Models are a means to simplification; compares to a map where only certain things are included A curve is a graphical representation that shows relationships The graph to the right depicts ice cream sales in regards to outside temperature. It is seen that as the temperature increases, ice cream sales also increase. When both X and Y increase it is called a positive (direct) relationship and has positive slope. Note that if the line went the opposite direction, pointing downward, it would be referred to as a negative (inverse) relationship with negative slope. Ice Cream Sales 50 40 30 Number of Ice Creams Sold20 10 0 20 40 60 80 100 Degrees in Fahrenheit Outside A negative relationship in Production Possibility Curves is: o Due to scarcity; depleting resources o Showing more of one good means less of another (trade-off) Example: Mr. Norander can teach one economics class per hour or can make two good jokes per hour. He has a six hour work day. Please flip to the next page for charts Class Jokes es Y-Values 6 0 15 5 2 10 4 4 Number of Jokes 3 6 5 2 8 0 0 1 2 3 4 5 6 7 1 10 Number of Classes 0 12 The Production Possibilities Curve above shows a negative inverse relationship between jokes created and classes taught. The best combination of jokes and classes depends on what you as an individual want. Things outside the curve are called unattainable; not enough time or resources to achieve Inside the curve is attainable but inefficient On the line where points are is considered efficient o All time, resources, employment, etc. are being used entirely For a nation, operating inside a curve shows unemployment To find the slope of a line: Rise= ∆Y = VertialChane Slope = Run ∆ X HorizontalChange In the PCC above for classes and jokes the slope would be: -2 -12/6 = -2 This slope tells us that it is negative (-) and that 2 jokes are sacrificed for every one more class he teaches. The one class taught is the opportunity cost for the graph (since two jokes were lost, the next best thing is to teach one class). The opportunity cost for one joke would be the inverse of the opportunity cost for one class. Another Example: Dr. Mark can teach 2 classes per hour, create 1 joke per hour and also has a six hour work day. Class Jokes es 12 0 Dr. Mark PPC 10 1 8 2 7 6 3 4 4 2 5 0 6 6 The opportunity cost of 1 class is .5 of a joke; slope: 6/12= .5. The opportunity cost of one joke is two classes. Comparative Advantage: Originally used to show trade between countries o Belongs to the individual or nation that has the lowest cost for producing something Example: In the TV show, “Lost,” two men are in charge of finding food. Jack, the lead hunter, can catch 20 fish and 5 polar bears in one day. Sawyer on the other hand can only catch 6 fish and 2 polar bears in one day. Find the opportunity cost for both fish and polar bears for each man and decide who Jokes created has comparative advantage. Should the two work together or continue to be divided? 3 Jack’s PPC Sawyer’s PPC 20 F F I I S S 6 H H For 0 bears, Jack has an opportunity 2ost that producing 1 bear costs him 4 fish. Meanwhile, Sawyer has an opportunity cost that producing 1 bear costs him 3 fish: POLAR BEARS ∆ y 20 4 ∆ y 6 3 o.c. = ∆x = 5 =1 and o.c. = ∆ x 2 1 For fish, Jack has an opportunity cost that producing 1 fish, costs him ¼ of a bear. Sawyer however can produce 1 fish per 1/3 bear. ∆ y 5 1 ∆ y 2 1 o.c.= ∆x= 20=4 and o.c. = ∆ x 6 3 Now that you have seen the information, who has comparative advantage of the fish and who has comparative advantage of the bears? Answer: Jack has the advantage in catching fish since it costs him less bears and Sawyer would have the advantage catching bears since it costed him less fish. So, should the two work together to find food? Yes! Each man represents specialization. **The next pages are direct scans of my notes- the curvature of the graph is important and I can’t accurately show that in a word doc**
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