ECON Ex. 1

  1. What is economics?
    • Social science
    • Seeks to understand how societies allocate their limited resources to satisfy unlimited human wants.
  2. What does the word "economics" derive from?
    • Greek language
    • "One who manages a household"
  3. What is economics different from other social sciences?
    • Based off humans acting rationally
    • Mathematically
    • Wide range of topics in our lives
  4. What is scarcity?
    • Limited recourses in our society
    • Cannot produce all the goods and services we want
    • Limited recourses = limited products made from those
    • We cannot consume everything, INCOME IS LIMITED
  5. What do Math, Scarcity, and Economics have in common?
    • Math = Economics
    • Economics = Scarcity
    • SOOOO
    • Math = Scarcity
    • Things are scarce, therefore it becomes and economic and math problem
  6. What do Scarcity, Efficiency, and Productivity, have in common?
    • Scarcity means being efficient in recourses
    • Efficiency- no waste, (minimal), which is the ultimate goal (No waste = high productivity)
    • Scarcity = Efficiency = Productivity
  7. Explain Economics in a more specific case?
    Economics - science of scarcity-efficiency-productivity!
  8. What is Laissez-Faire?
    • "Let them be" in French
    • Laissez- let them
    • Faire- make, pass through
    • Pure Capitalism (modern english)
  9. Who is Adam Smith?
    • Established economics in the 18th century
    • Wrote "The Wealth of Nations" in 1776
  10. What is so significant about the 18th century and economics?
    • Era of changes
    • Enlightenment
    • French were really productive
    • Therefore... Lassiez-Faire
  11. What is the "Wealth of Nations"?
    • Written by Adam Smith in 1776
    • Major piece of work in economics
    • Self pursuit = good for society
    • (Bread man, baking for society, as well as doing good for himself.)
    • Basic capitalism
    • Pursuit of self interest = isn't against public interest
    • (Going to college, one day working in the world to self serve and do good for society)
  12. Explain Economics and Politics...
    • Economics is different from politics
    • UNTIL- fiscal policy
  13. What are the 3 fundamental questions of economics?
    • What to produce
    • How to produce
    • Who to produce to

    All about choices
  14. Explain pure capitalism...
    • Deals with problem of scarcity then efficiency and productivity.
    • Economic equality
  15. Explain the economic pie in pure capitalism terms...
    • Efficiency- size of the economic pie
    • Example: China econ. pie surpluses US
    • Pure cap/eff. = size / economic growth
    • Sustainable (high but stable)
  16. Explain economic pie cut up!
    • Who gets what?
    • Pure social equality & economic quality- not the same
    • Social- divide equally among members
    • Economic- (capitalism)- same opportunities but different perf.
    • "Cannot give everyone "A's"- work for an output
  17. What is Modern Capitalism?
    • Only in certain places (modern)
    • End result- more desirable that any other system
    • More productive people (able to get more ahead)
  18. Who is the face for Pure Capitalism & Pure Socialism?
    • PC- Adam Smith
    • PS- Karl Marx
  19. Who was Karl Marx and what did he do?
    • Focused on countries falling behind
    • More centralized economic way of doing
    • Pure socialism
    • Classic Economics
    • Founder of Modern Socialism
    • No freedom in market place
    • Some one has to reorganize the resources in market place
  20. Give some examples for pure socialism?
    • North Korea
    • Cuba
    • Venezuela
  21. Give some examples for pure capitalism?
    • China
    • Hong Kong
    • Macall
    • Dubai
  22. Give examples of countries who are in the middle of the pure social and capitalist ways.
    • France
    • Sweden
  23. Where is US on the scale of Pure socialism and capitalism?
    • Gov. exp.- 20-25%
    • 1/5 $ to uncle sam
    • solution to economic problem, 80% capitalism
    • We are mixed, but closer to pure captialism
  24. Limited inputs = ?
    Limited outputs!
  25. What are the 2 types of outputs?
    • Intermediate- things bought to produce the final product. (Intermediate)
    • Final- purchased by final consumers- final product (All the things used to make a Big Mac)
  26. What are some other names for Input and Output?
    • Input- resources, factors of production
    • Output- goods & services, products
  27. What are the 4 types of economic products?
    • Land
    • Labor
    • Capital
    • Entrepreneurship
  28. Explain Land in the economic products...
    • On or under earth- natural resources
    • Forest, farm land, oil in middle east, gifts of nature
  29. Explain Labor in the economic products...
    • Lease skills to employers
    • brain power, skills, accounting/landscaping skills
  30. Explain Capital in the economic products...
    • Only 100% man made resource!!!
    • Some countries- rich in land resources (lucky by geography)
    • Some countries- rich in capital! (US or Japan)
    • Example: Japan invested in lots of projects, became industrialized = standard of living
  31. What is the equation for finding slope?
    (y2-y1)/(x2-x1)= slope!
  32. What is another word for "its going down" in a graph?
    • Negative
    • Its an inverse relationship b/w x and y
    • Downward slope
  33. SA,B=
  34. What is the response of x or y when it goes up 1 unit? As in an example...
    slope, (Y2-Y1)/(X2-X1)
  35. Horizontal / straight line is...
    zero slope!
  36. Line up and down, vertical...
    • No slope!
    • and INFINITI!!
    • not undefined
  37. Point Slope- What is happening at pt A and B? Relationship wise?
    • Draw line from A (straight line)- along that line, find slope.
    • Draw line from B (straight)- find point slope
    • A compared to B- (A pt slope +1.2) then (B pt slope +2)
    • tells you the magnitude of the relationship, signs are consistent
  38. What are the 2 points to Point Slope?
    • Positive or Negative (related or not)
    • Numerical Value (constant or not) (curved line cannot be constant!) - only look at numbers, not signs.
    • Is it going down or up? (ex.- Up, or Down)
  39. What do you do when the graph is a upward U shape?
    • Left side = positive, slope is getting flatter sooo numerical value is falling
    • Right side = Negative, inverse, numerical value is steeper so rising
    • Middle = Slope is zero (flat at the specific point)
  40. Scarcity relates to...
    Scarcity = trade offs = opportunity cost
  41. What is opportunity cost?
    • Opportunity lost
    • Total dollar amount you give up because of economic decision
    • 2 types- Explict, Implicit
  42. What are Explicit Costs?
    • Example: Big Mac $4.99
    • Visible money you are giving to enjoy your Big Mac
    • College= Books, tuition, fees..
  43. What are Implicit Costs?
    • Total economic costs
    • Less noticible, less visible
    • The money you spend going to get your Big Mac, time, gas, etc.
    • College= time you give up to attend college, giving up chance to have job now
  44. Economic Costs ____ Accounting Costs?
    • Greater than!
    • Accountants ignore implicit costs!
    • Economic costs > Accounting Costs
  45. Explain trade offs in terms of effciency (economic pie).
    • Growing = effciency
    • How fast the pie is growing
    • Might have the same sized pie, but based on how efficient you are, your pie grows at a faster rate than others.
    • (China was prof. example)
  46. Explain trade offs in terms of equity (economic pie).
    • Social equality = "equity"
    • Division is equal
    • Not dynamic changes, but specific pie equally divided
    • Nothing is happening to the size, just distributing the wealth
    • Socialism
  47. What are inputs?
    • Factors of production
    • Resources used by firms in their production processes to make outputs.
    • Land, Labor, Capital and Entrepreneurship
  48. What are outputs?
    • Goods and services consumed or used for further production
    • If the output is consumed- final output
    • If they are used to make another output- intermediate
  49. What are the 10 principles of Economics?
    • Trade offs
    • Opportunity cost
    • Marginal analysis
    • Incentives
    • Voluntary Exchange
    • Markets
    • Externalities
    • Productivity
    • Inflation
    • Phillips Curve
  50. Economic Profits ____ Accounting Profits?
    • Economic Profits < Accounting Profits
    • ALWAYS Less than!
    • SO- Profits of economy are always less!
    • Costs of economy are always more!
  51. Explain Marginal Analysis.
    • Related to scarcity
    • AKA: Additional, Extra, Incremental
    • Example: College- could take similar classes at other places, but you choose KSU
    • Risks taken when there is Marginal Benefit and Marginal Cost.
  52. Marginal Benefit ____ Marginal Cost?
    • Marginal Benefit > Marginal Costs
    • Greater than!
    • Marginal Benefit- something of economic dec.
    • Marginal Costs- things you give up
    • If you're not benefitting from those things, you wouldn't put so much cost into them. The benefit is always greater or you wouldn't do it!
  53. Explain Incentives.
    • Goes with Marginal Analysis
    • Important function of modern capital economy
    • There are dis-incentives and incentives (specific market place)
    • Price of product; Government gets on taxes; profit margins
    • Weighing out the costs and benefits to something by the incentive you get from it!
    • Example: Over taxing = less incentives to work, save, and invest.
  54. Explain Trade / Voluntary Exchange.
    • Example: Because Wal-mart is there, you go!
    • Core concept is capitalism
    • Laissez-faire concept
    • Based on simple (free trade; vol. exchange)
    • Domestic- markets free
    • International- government economy policies are geared towards vol. exchange
    • Free trade = beneficial for everyone
  55. Explain Markets.
    • Economy in which allocates resources through the decentrailized decisions of market participants.
    • Free organizations
    • In every language- means same thing
    • Bring successfully people together for vol. exchange with no gov. intervention
    • Buyers and sellers brought together
    • (Capitalism) Free Market System- price system- Laissez-faire system
    • What do they do?
    • ecentralized system and higher levels of productivity When free markets arn't free, that is when you get Externalisities
  56. Explain Externalities.
    • When there is a market failure, government gets involved.
    • Market is left on its own, fails to allocate socieities resources efficiently.
    • Externalities- actions of one person impact well-being of third parties, they get a benefit.
    • Spillovers- 2 types of externalities
    • External costs or external benefits
  57. What are other words for External Costs and External Benefits?
    • External Costs- negative externalities
    • Example: enviornment pol. teaching in 3 places, driving, noise, third party is YOU. Taxing can correct negitive ext.

    • External Benefits- positive externalities
    • Example: Education, government subsidizes for the buyer and seller, we get to benefit!
  58. Explain Market Power.
    • Someones ability to minipulate outcome of price and output
    • Example: Monopoly (ext. possibility- extreme)
    • 1 firm- serves market, has buyers
    • end result isn't desirable
    • Private monopolies = illegal in US
    • jack up the price & reduce output
  59. Explain Productivity.
    • Macroeconomics
    • High productivity = high standard of living
    • Output/Input (ration) measure performance
    • Very simple model
    • Long run- nastions / individuals standards of living depends on production of recourses (goods)
    • Gives an idea of what to do (policies to make prosperty)
    • Growth rate production = change production %
    • US Prod = $55/ 1 hr. labor BUT Growth rate is 1-3%
    • Mx Prod = $18/ 1 hr. labor BUT Growth rate is 4-6%
    • They will eventually catch up!
  60. Explain Rate of Inflation.
    • Macroeconomics
    • Could eliminate middle class within a decade
    • Opposite = deflation (rise and fall)
    • hyperinflation- 2400%, makes the dollar worth nothing
  61. What is the "Purchasing power of money"?
    • Voluntary goods and services that money can buy
    • Over all prices go up = Purchasing power goes down
  62. Explain the Phillips Curve.
    • Macroeconomics
    • Shows the inverse relationship between the unemployment rate and the inflation rate
    • Downward slopping
    • Overall prices go up = Unemployment goes down
    • Overall prices go down = Unemployment goes up
  63. What is the rate of inflation?
    % of change in overall prices
Card Set
ECON Ex. 1
Notes from Chapters 1 & 2