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ECON 1BB3 Lecture Notes - Open Economy, Price Floor, Mastercard

Course Code
Bridget O' Shaughnessy

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Macroeconomics: Lecture 2
What is more dangerous, a gun or a swimming pool?
Why is economics difficult
Express ideas in economics:
1. English Language
2. Algebra/equations
3. Diagram/graph
Translate between each different form of communication
Economics is a social science
Social = people
Science = use scientific method
Test theory
Natural experiment
Microeconomics vs. Macroeconomics
Microeconomics: individual households and firms and how they interact
Macroeconomics: economy-wide phenomena such as interest rates, unemployment, money, and
Efficiency vs. Equity
Efficiency is the size of the pie
Equity is how the pie is divided
Positive vs. Normative analysis
Positive: the world “as it is”
Normative: the world “as it should be” value judgment
Model = simplification
Diagram or equations
Eg. Map of a city
Classify Variables
Real variables vs. nominal variables (physical quantities) vs. ($)

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Stock variables vs. flow variables (snapshot at point in time) vs. (time element eg. Per year)
Example of a model: Circular Flow Diagram
Market for goods and services
Firm Household
Market for factor services
Macroeconomics: Lecture 3
Why doesn’t Sidney Crosby mow his own lawn?
Comparative advantage exercise:
Group B:
The Production Possibilities frontier
PPF: the combinations of output that the economy can produce given the available factors of production
and production technology.
Choose a point to consume in autarky
Autarky: no trade
Feasible: a combination that lies on the PPF or inside the PPF
Infeasible: a combination that lies above the PPF
Efficient: an outcome that occurs if the economy can get all it can from its scarce resources
You are better off if you have at least the same amount of 1 good an more of the other good you are
better off
You are better off if you can consume outside PPF

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Lecture 5: What affects your decision to go to the movies?
Market = group of buyers and sellers
There are 4 types of market structure:
Perfect competition (1 buyer, 1 seller)
Monopolistic competition
Quantity Demand (Qd): the amount of a good that buyers are willing and able to purchase
The variables that influence how much buyers want to buy are:
1. Price
2. Income
Normal and inferior goods
3. Price of other goods
Substitute and complements
4. Tastes
5. Expectation
Law of Demand: other things equal (ceteris paribus), the quantity demanded of a good falls as the price
of the good rises
Market Demand: the sum of individual demands
Shifts in demand ( change in demand) are caused by a change in anything other than price
Demand: anything that affects the curve
Movement along the demand curve (change in quantity demanded) is caused by a change in price
If demand increases, the curve shifts OUT
If demand decrease, the curve shifts IN
Lecture 7: What will happen to Wal-Marts everyday
low prices if there workers unionize?
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