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Unformatted text preview: F I NAL: DECEMBER 16, 10:30!!!!- chapter 14, 15, 16, 17- chapter 3, 18, 21 ECON200 Class Notes cengagebrain.com (register for aplia)- The study of how best to allocate scarce resources among competing uses. (what is the best way to apply scarce resources?) Macro study of economy-wide phenomena, including inflation, unemployment, and economic growth Ex: Decisions made by the president; ensure that the country produces more, keep employment rate up, and maintain the stability of prices Micro study of how households and firms make decisions and how they interact in markets. Attempting to figure out which decisions as individuals need to be made and how to do so. Goal : maximize profits; take in goods and services Ex: Georgetown cupcakes giving away free cupcakes to build clientele Resources : Factors of Production 1 Land 2 Labor (skills) 3 Capital (tools used to produce more goods; scissors, hammers, pencils) *Need these to produce goods and maintain services. Usually scarce; always in need of more. Assumptions and Models:- Assumptions simplify the complex world, making it easier to understand Ex: When studying international trade we might assume the world consists of two countries and two goods. - Models : road map, human body The Economist as a Policy Advisor : - Normative Statements- Attempt to describe how world should be. Attempting to believe- Example: A tax cut is needed to stimulate the economy - Positive Statements- Can be confirmed or refuted, unlike normative statements. Creates relationships, checks it out, uses data. - Example: Prices rise when the government increases the quantity of the dollar. Circular Flow Diagram:- Visual model of the economy, shows how dollars flow through markets amount households (type1) and firms (type 2)- 2 Markets: - Goods/Services- Factors of Production OUTPUT quantity of goods or services produced in a given time period by a firm, industry, or country I N PUT factors of production: land, labor, capital 9/7/10 Production Possibilities F rontier (PPF):- A graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology- Produce more output by obtaining more resources or by receiving better technology- Moving along PPF involves shifting resources (like labor) from the production of one good to the production of the other- Society faces a tradeoff. Getting more of one good involves sacrificing some of the other- The slope of the PPF tells you the opportunity cost of one good over the other (Y2-Y1)/(X2-X1) rise over run or the amount the line rises when you move to the right by one unit....
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- Fall '08