Lecture Notes for Jan 23, 2009
- University of Minnesota - Twin Cities
- Economics 1102
- Lecture Notes for Jan 23, 2009
- 1. What goods and services will be produced?
- 2. how will goods and servoces be produced?
- 3. who will get the goods and services?
- 4. how will the system accomodate change? Ex: preferences, technology, resources
- 4. how will the system accomodate progress?
- 1. We study the "average person" in the economy
- 2. other-things-unchanged; look at the event as a single event. Dont include outside assumptions
- economics- studies how humans interact under conditions of scarcity- a social science that examines our consumers, institutions and society and the decisions they make, or should make, under conditions of scarcity.
- microeconomics- the study of economic behaviors of individual consumers, households, firms, and institutions.
- macroeconomics- the study of the economic behaviors in the economy, "the study of aggregates"
- Why do developed countries have lower fertility that developing countries?
- What economic policies should the government follow to get a country out of a recession?
- Examples of micro questions:
- Examples of Macro questions:
- 1. extensive private property rights
- 2. freedom of enterprise and choice
- 3. self interest as the primary motivating force
- 4. competition
- 5. existance of proces and markets
- 6. active but limited government
- aggregates- the collection of individual entities, treated as if they were 1 unit.
- If the price of cream cheese changes, how does my demand change?
- If my wages rise, will i work more or less hours
- Scientific Method
- 1. Observe some aspect of the universe (data)
- 2. create a hypothesis that is constant with the data
- 3. use the hypothesis to make predictions about other data you dont have yet
- 4. Test hypothesis by compairing data in 1 and 3
- 5. if it fails, you create a new hypothesis- if it succeeds, it becomes a theory
- Marginal analysis- the compairisons of the costs and benefits of the marginal unit
- Two large simplifications:
- Types of economies:
- scarcity- the economic observation that humans have unlimited wants, but limited resources.
- Incentive problem . Output:CPB determines mix of goods. Innovation- happens slowly, stagnation
- Coordination problem. Output:CPB determines the correct mix for millions of people
- Economic system- a set of institutional arrangements to determine how to distribute scarce resources to satisfy peoples wants
- Answers 5 questions:
- command system- (communism, socialism) IN this systenm the governement owns most of the resources. The central planning board (CPB) makes a decision about the uses of the resources. Government also owns all the firms, which produce according to government directives. The CPB also decides the division between consumption and capitol goods.
- Market system- (capitolism) Resources are privately owned, goods are privately produced accordign to the profit motive. The allocation and quantity of goods produced is determined through prices-(the system through which buyers and sellers communicate) and Markets- (the place where buyers and sellers come together to exchange goods.
- Tools of economics:
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