DAY 3 ECON NOTES
DAY 3 ECON NOTES Econ 103
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This 3 page Class Notes was uploaded by M on Sunday September 20, 2015. The Class Notes belongs to Econ 103 at George Mason University taught by Donald Boudreaux in Spring 2014. Since its upload, it has received 72 views. For similar materials see Microeconomics in Economcs at George Mason University.
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Date Created: 09/20/15
DAY 3 Ceteris Paribus quotWith other conditions staying the samequot A useful theory is not one that gives you all the details Basic outline of the critical information examples names of main roads distances All theories in quottheoryquot are unrealistic Fallacies 0 Composition quotThat which is true for an individual is therefore good for the groupquot What s true for the individual is not necessarily true for the group Someone stands up at a concert to get a better view 0 Ad hominem When someone judges the merits solely by the identity of the person making the argument Based on sex occupation race age 0 Post hoc ergo propter hoc Event B happened after A therefore A caused B It may be true but the assumption is incorrect It may even be despite instead of because Economics Theory Production possibilities curve production possibilities frontier o Tes us what possibilities can be produced and what cannot be 0 What it does not tell us is where to start and how much of a good we want versus other goods Inside the curve can Outside the curve can t Producing outside the curve cannot be done It can move outwards with economic growth Things that were not possible in the past become possible Economic growth An increase in supply of raw materials An increase in productive human abor Improvement of technology An improvement in a society s law and social institutions regulations and laws OOOO gtUUl 39 5 Change in the methods of productions particularly in the division of labor or specialization Specialization 1 No longer wastes time going from task to task 2 More dexterous skilled at what they do 3 More likely to make machines that do the work Pin factory example 0 Adam Smith Why does the PPC T 0 Division of labor more specialization 0 People specialize in different tasks such as pulling the wire cutting the wire sharpening the wire etc o A pin maker can make an average of 20 pins a day 0 A pin factory with specialization can make 4800 pins a day Richer society quotThere ain t no such thing as a free lunchquot TANSTAAFL Does not mean an individual can t get something for free it means society cannot Comparative advantage The effectiveness of producing quotgood Aquot rather than quotgood Bquot in order to trade with someone who has more comparative advantage to produce quotgood Bquot rather than quotgood Aquot quotA country has comparative advantage in producing goods for which it as the lowest opportunity costquot 0 And lower marginal cost Bananas and sh example Every person in the world can consume more than they can produce By becoming more skilled at making one good you become less ef cient in producing other goods This lowers your comparative advantage but increases someone else s David Ricardoidenti ed quotThe Principle in Comparative Advantagequot Consumption and Capital Goods Consumption goodgoods that we use today Capital goodsaving up to get something that s going to be more useful in the end To get capital good you must reduce save consumption goods
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