Microeconomics Review - Micro Economics C G I What makes...

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Micro Economics C+G+I : What makes the Economy o C stands for consumer; I for investment and G for spending. Economic Systems: capitalism, communism, socialism, mixed o Communism: big in 1917-1991, then collapsed, but it still exists in Cuba, Vietnam, and North Korea. 4 kinds of markets: o Pure competition: Most dominant market, open market, nobody controls price, and products are similar with some differentiations. o Monopoly: 1880-1932 was when it was most dominant. After the Anti-Trust Law, monopolies were prohibited. In a monopoly, there is one seller, it is a closed market and there is price control. o Monopolistic Competitions (mix between pure competition and monopoly): 100-120 firms exist in the industry and it is differentiated: trademarks are most dominant in the market, chemical compositions (Chevron adds Techron), services (you pay for service). Markets are semi-closed. o Oligopoly: Few giant corporations (between 4-9), prices are fixed by the corporations, and the market is semi-blocked. International Trade and Finance o Cheaper labor if a product is not made in America, so most American products are not made in America and we import instead. Chapter 1 : 1776: Adam Smith published The Wealth of Nations , which asked how a country can go from being poor to developed. -Factors for production: need capital, develop skilled labor, banking system (promote investment), and raw materials. -Developed capitalism, which is based on competition. Provided lower prices, and better quality products. 1822: David Ricardo joined Adam Smith. He published The Political Economy of Taxations . He introduced the concept of taxing. 3 Sections of Government: o Federal Revenues (2 Trillion): Income taxes, corporation taxes, excise taxes, bonds o State Revenues (100 Billion): Sales taxes, income taxes, corporation taxes o City Revenues: property taxes, sales taxes, fees, tickets. o Federal Expenditures (2,6 Trillion): Defense, Health, Social Security, Departments o State Expenditures: Education, Roads, Canals, Courts, Welfare o City Expenditures: Education, Welfare, Roads, Canals, Sewers, Water Dept, Police Dept o Robert Malthus, 1822: “The Political Economy of Population”
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Capitalism : 1842, Karl Marx attacked classical school, attacked capitalism and published a book saying capitalism exploits and generates unemployment. Globe became divided into two systems: capitalism (Smith) and communism (Marx). NATO tried to stop communism. Facism : Started in Italy. Hitler hated communism and capitalism, so he made Nazism. Politically, he failed because he based his system on race. 1889: Alfred Marshall. He took political economy and made it economics. He introduced math, statistics, and graphs and made the econometrics model which is a combination of math and economics. Economics : the study and administration of scarce resources; the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of wants.
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