Week 2 Microeconomics Notes
Week 2 Microeconomics Notes ECON 201
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This 7 page Class Notes was uploaded by Lauren Huettemann on Monday September 7, 2015. The Class Notes belongs to ECON 201 at Ball State University taught by Zhukov in Summer 2015. Since its upload, it has received 90 views. For similar materials see Elementary Economics in Business at Ball State University.
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Date Created: 09/07/15
Ch 2 1 Factors of production a Labor time and effort put into production i ii iii iv b Land ii Quantity number of people working Quality skill set Household Compensation by wages Natural resources Compensation rent c Capital differences between advanced and developing countries have an effect on who gets goods services between Physical and Human i Physical 1 All physical equipment used in production land amp equipment 2 More advanced economy used a greater amount of equipment in production 3 Transportation system connects major cities and points of production ii Human 1 Knowledge received to be more productive education job training experience 2 Interest rate return made 3 Advanced economy have higher levels of extensive education and training d Entrepreneurship i Visionary skills ii Pro t total revenue total cost 1 Drives compensation II Circular Flow Model a Federal government expenditures provide i Goodsservices legal system ii Social Security and Welfare 1 Transfers from federal to households iii Transfers to statelocal government b Taxes paid to the Federal Government i Personal Income Tax ii Business Income Tax iii Social Security Tax c State government expenditures provide i Goodsservices ii Welfare bene ts 1 Unemployment bene ts 2 Aid to low income families d Taxes Paid to State government i Sales Tax ii Property Tax iii State Income Tax 111 What We Produce a Consumption goods services items individuals government buyuse up in a current period i Households housing auto movies doctor ii Government police re garbage education b Capital goods business and government buy to increase productive resources over future periods to produce other goods services i Businesses auto assembly lines shopping malls airplanes ii Government missiles weapons public schools interstate highways iii 85 of US production IV Production a Rent paid for use of land b Wages services of labor c Interest paid for use of capital d Pro tLoss incurred for running business e Functional distribution of income distribution of income among factors of production f Personal distribution of income distribution of income among households Emerging and Developing a Emerging market economies emerging from system of state owned production central econ planning moving towards free enterprise and unregulated market b Developing economies incomes lower than advanced economies i Vary in size income and rate of growth of production VI Circular Flow Model Markets for GoodsServices Household buys Firms sell Goodsservices to Gov t Firms Government Households Produce sell goods Transfer payments Buy consume Hire and use to household goods factors of Subsidies to rms Ownsell factors of production Send money to production Send taxes to gov t Goods Market Send taxes to gov t Markets for Factors of Production Households sell Firms buy PPF EXAMPLE Quantity Apple Pies O 2 4 6 8 10 Quantity Eclairs 30 28 24 18 10 0 Concave Anything inside curve can be produced 0 Any point inside PPF is inef cient Anything outside cannot be produced Any point on PPF is ef cient Slope opportunity cost 0 Gain 2 apples pies giving up 2 eclairs Absolute Advantage ability of a party to produce more of a goodservice than competitors using the same resources Autarky Points isolated from trade Comparative Advantage party has advantage if they are able to produce goods services at a lower opportunity cost compared to anyone else Exports goods and services sold to the rest of the world Factors Market services of factors of production are bought and sold Goods Market goodsservices are bought and sold Imports goods and services bought from the rest of the world Irrational makes you worse off Market arrangement brings buyers sellers together and enables exchange of info and business with each other Net Exports NX exports minus imports Opportunity cost value of next best alternative Production activity resulting in conversion of resources into products that can be consumed Production Possibility Frontiers PPF boundary between combos of goods services that can be produced or not produced given the available factors of production and current state of technology Rationality doesn t make you worse off Specialize focused on producing only one product
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