ECON 225 Exam Study Notes

ECON 225 Exam Study Notes - ECON 225 Exam Study Notes –...

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Unformatted text preview: ECON 225 Exam Study Notes: – The goal of economics is to maximize social welfare – Microeconomics: specific, at the individual/firm level – Macroeconomics: general, at the regional/national level – Positive statements: fact – “what is” – i.e. it is 10 degrees Celsius outside – Normative statements: opinions – “what ought to be” – i.e. it is too cold outside – Economics is based on positive statements, not normative ones – Incentive: anything that gives a motive for a particular course of action, a reason why you would prefer one thing over something else – Firms maximize profit – People maximize personal welfare – Governments maximize social (society includes firms and people) welfare – Costs are easy to measure, benefits are very difficult to measure – Costs: making, implementing and monitoring legislation, cost of cleaning, cost of implementing new technology (replacing machines, training workers, etc.) – Some benefits cannot be given a market value – Spreading of pollution: – Suburban sprawl: clustering of suburbs around cities – Suburbanization is very common in industrialized countries – Uses agricultural lands, creates road congestion, people travel further distances to go to work – The economy has two activities: production and consumption – Resources are taken from the earth – They are used and processed in production to create consumable goods – Nature -> inputs -> economy -> residuals -> nature – Natural resource economics: the study of the use of natural resources – Environmental economics: study of residuals on natural resources – 2 types of resources: – Renewable: living resources, replenish at a certain rate, rates differ depending on the stock of population, it may break down after a certain threshold – Non-renewable: don’t grow back or replenish in practical terms (oil, minerals, etc.) – Sustainability occurs if exploitation is less than or equal to the replenishing rate – Models: – Good to simplify the world and understand relationships between things – Allows for less calculation time: you need less information for policies, it is more practical – M(what you take from nature) = G(goods produced) + Rp (residuals from production and consumption) – Rrc (recycled residuals from production and consumption) – There are three medias that can be polluted (air, land and water) – Cumulative pollution: adds up over time and does not go away easily – i.e. mercury and plastic – Non-cumulative pollution: degrades easily, goes away over time, not as harmful to environment – i.e. banana peels, sound pollution – Pollution may be local or regional – Generally, the more you produce in the economy, the quality of the environment decreases – The more you produce, the more the PPC of goods vs. Environmental quality decreases – If you are on the PPC, you are 100% efficient – Minimum demand: the lowest you can create in order for people to be able to live...
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ECON 225 Exam Study Notes - ECON 225 Exam Study Notes –...

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