Economics - 1. Economics: Foundations and models a. How are...

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1. Economics: Foundations and models a. How are the prices of goods and service determined? i. Supply and demand, gas prices fluctuate quickly 1. burning refinery, 20 cent increase approx b. How does pollution affect the economy, and how should government policy deal with these effects? i. Good affects bc means we’re producing ii. If you want to eliminate pollution, no business iii. Must find optimal level of pollution, the US allows trade of carbon allotment 1. ex. If only used 50 tons of pollution and allowed 100, can sell the other 50 to someone else. iv. Will focus on having some pollution c. Who do firms engage in international trade, and how do government policies affect international trade? (CH 2 and CH 8) i. Trade because some people are better at different things. 1. China is good at production, US is good at design d. Why does government control the prices of some goods and service, and what are the effects of those controls? i. Taxation, regulations, etc. Why? 1. Tax on gas, 47 cents on the gallon of gas 2. What is the effect on the economy? 3. Impose tax bc generates money, discourages consumption 2. Economics Foundation and models a. Scarcity- the situation where unlimited wants exceed the limited resources available to fulfill those wants. i. The more people, the higher the demand ii. When the wants exceed the supply, item becomes scarce. iii. “Am I paying for it?” means there is limited supply 1. Air is not scarce, for now. 2. Water is scarce, paying for it monthly 3. Trees, scarce- lumber is expensive 4. leaves- not scarce, depending on type 5. FREE STUFF is NOT scarce b. Economics- the study of the choices people make to attain their goals, given their scarce resources (choices we make in the face of scarcity) i. Aka STEAL/ROB people 3. Microeconomics and Macroeconomics a. Microeconomics- the study of how households and businesses make choices, how they interact in markets and how the government attempts to influence their choices. i. 1 or 2 schools built? ii. Tax on beer because too much drinking 1. effect may be increased sales on coke
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b. Macroeconomics- the study of the economy as a whole, including topics such as inflation, unemployment and economic growth. i. Inflation ii. Unemployment iii. Find ways to lower unemployment w/o generating inflation 4. The economic problem that every society must solve a. Trade off- the idea that because of scarcity, producing more of one good or service means producing less of another good or service i. 3 fundamental questions 1. What goods and services will be produced? a. Disco balls, songs, cassette tapes, ipods b. Consumers must tell producers what to produce c. More houses in davis d. Price system-items with higher prices via demand stay expensive bc of demand and will continue to be produced. 2.
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This note was uploaded on 04/11/2009 for the course ECON 101 taught by Professor Miyanishi during the Spring '08 term at UC Davis.

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Economics - 1. Economics: Foundations and models a. How are...

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