ECON 102 Lecture Notes - Lecture 2: Spontaneous Order, Positivism, Planned Economy

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indigoskunk197

28 Aug 2016

School

University of Illinois

Department

Economics

Course

ECON 102

Professor

Dr.Isaac Di Ianni

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ECON 102 Full Course Notes

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Document Summary

Economics is the science that studies production and trade. It links individual values with the social order. This is the order which is the product of human action but not human design i. e. no one heads the system but yet a system persists which consists of humans. Economics is important to make better business decisions and to apply critical thinking to all social sciences. Positive analysis: here we describe the way things are. Normative analysis: here we describe the way things should be. Example: this wall is black: positive statement. (here the truth of the statement does not matter) This wall should be black: normative statement. (again the truth is not important) Economics is a positive science, although the lessons we learn in economics may affect our normative beliefs. It is the principle that explains some phenomenon. Theories tend to abstract away from non-essential details. The two basic social systems are market and command economies.

Related Questions

Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the

	a.	forgone working or partying, depending on which was your next best choice.
	b.	forgone work.
	c.	forgone working and partying.
	d.	test because you are taking it.

1 points

QUESTION 2

A trend is

	a.	a measure of closeness on a scatter diagram.
	b.	a general tendency for a variable to rise or fall.
	c.	the maximum value of a variable.
	d.	the difference between the maximum value of a variable and the minimum value of the variable.

1 points

QUESTION 3

A time-series graph measures

	a.	time on the y-axis and the variable or variables in which we are interested on the x-axis.
	b.	time on the x-axis and the variable or variables in which we are interested on the y-axis.
	c.	the value of one variable against the value of another variable.
	d.	the value of an economic variable for different groups in a population at a point in time.

1 points

QUESTION 4

Canada has nationalized health care, so that everyone, regardless of their ability to pay, has some access to health care. Based on this observation, Canada has decided that "everyone, regardless of their ability to pay" is the answer to what microeconomic question?

	a.	Why will we offer health care?
	b.	How will health care be produced?
	c.	For whom will health care be produced?
	d.	What type of health care will be produced and in what quantity?

1 points

QUESTION 5

As a shoe factory adds more workers, shoe production grows, reaches a maximum, and then shrinks. In a diagram that has the number of workers on the horizontal axis and the number of shoes on the vertical axis, the relationship between the number of workers and the number of shoes starts as ________ and then, after the maximum point, is ________.

	a.	positive; negative
	b.	negative; positive
	c.	linear; negative
	d.	positive; linear

1 points

QUESTION 6

Microeconomics includes the study of the

	a.	choices made by individuals and businesses.
	b.	recessions and inflation in the global economy.
	c.	aggregate effects on the national economy.
	d.	reasons why the government changes interest rates.

1 points

QUESTION 7

When Fresh Express Salads decides to mechanically pick all of its lettuce, it directly answers the ________ question.

	a.	when
	b.	for whom
	c.	how
	d.	what

1 points

QUESTION 8

Proponents of cuts in income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that

	a.	the opportunity cost of working is negative.
	b.	the marginal cost of each additional work hour is not important to most workers.
	c.	workers are irrational.
	d.	workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.

1 points

QUESTION 9

A choice made by comparing all relevant alternatives systematically and incrementally is

	a.	an opportunity cost.
	b.	a benefit.
	c.	a sunk cost.
	d.	a choice on the margin.

1 points

QUESTION 10

A normative statement

i. can be tested as to whether it is true or false.

ii. is considered negative.

iii. depends on a person's values.

	a.	i, ii, and iii
	b.	iii only
	c.	i and iii
	d.	ii and iii

1 points

QUESTION 11

Normative statements

i. describe how the world is.

ii. describe how the world ought to be.

iii. depend on people's values and cannot be tested.

	a.	iii only.
	b.	i only.
	c.	ii and iii.
	d.	ii only.

1 points

QUESTION 12

In order to determine whether to major in economics, a rational individual compares the ________ of the decision.

	a.	positive benefits and normative costs
	b.	normative benefits and positive costs
	c.	marginal benefit and marginal cost
	d.	opportunity cost and the sunk cost

1 points

QUESTION 13

If x increases whenever y decreases, then x and y are

	a.	positively related.
	b.	negatively related.
	c.	not related.
	d.	related but whether positively or negatively related depends on whether the x variable or the y variable is plotted on the vertical axis.

1 points

QUESTION 14

Rational choice

	a.	is what you must give up get what you want.
	b.	is made by comparing different incentives.
	c.	making the choice.
	d.	provides the answer to only the "how" question.

1 points

QUESTION 15

Scarcity results from the fact that

	a.	choices made in self-interest rare not always in the social interest.
	b.	not all goals are desirable.
	c.	people's wants exceed the resources available to satisfy them
	d.	we cannot answer the major economic questions.

1 points

QUESTION 16

When Delta decides to quit flying to Lithuania, it directly answers the ________ question.

	a.	what
	b.	why
	c.	for whom
	d.	how

1 points

QUESTION 17

A normative statement

	a.	says what is currently believed about the way the world operates.
	b.	depends on someone's values.
	c.	cannot use the word "should."
	d.	must be tested to determine if it is correct.

1 points

QUESTION 18

Which of the following statements best describes the study of economics? Economics studies how

	a.	to organize production so that scarcity does not occur.
	b.	to create incentives so that scarcity does not exist.
	c.	firms make profits.
	d.	we make choices in the face of scarcity.

1 points

QUESTION 19

Which of the following best defines economics?

	a.	Economics teaches how to limit our wants.
	b.	Economics is concerned with prices and quantities of goods and services, both at the individual level and at the industry level.
	c.	Economics helps you earn as much money as possible.
	d.	Economics studies how to choose the best alternative when coping with scarcity.

1 points

QUESTION 20

In economics, cost is ________, and benefit is ________.

	a.	the amount of money that you pay for something; the amount of money that someone else is willing to pay you
	b.	what you are willing to pay on the margin; what the government pays you when you are unemployed or retired
	c.	what you must give up to get something; what you are willing to give up to get it
	d.	the amount of money that you pay on the margin; the amount of money that you receive on the margin

1 points

QUESTION 21

If Jessie studies economics for two hours instead of going to the movies with her friends, then

	a.	the opportunity cost of studying is the missed movie.
	b.	Jessie is ignoring a sunk cost
	c.	Jessie is not responding to any incentives.
	d.	Jesse definitely is making a rational choice.

1 points

QUESTION 22

Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing.

	a.	The $80 price of skiing is a sunk cost and so did not affect Adam's decision.
	b.	He loses a total of $120 per day, so his decision is irrational.
	c.	His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
	d.	Adam's lost $40 per day in wages is a sunk cost and so did not affect his decision.

1 points

QUESTION 23

If a curve falls and then rises, it

	a.	has a maximum.
	b.	has a linear relationship.
	c.	has a minimum.
	d.	has a constant slope relationship.

1 points

QUESTION 24

In 2003, Michael Jordan decided to retire from professional basketball. Which of the following was an opportunity cost of his decision?

	a.	the avoidance of pain and injury from playing one more year
	b.	the time he could spend with his family while retired
	c.	the lost salary from playing one more year
	d.	the value of new employment opportunities that would await him

1 points

QUESTION 25

Which of the following statements is a normative statement?

	a.	Military spending as a percent of government spending decreased by 5 percent in the 1990s.
	b.	Every American household should have health care insurance coverage.
	c.	Welfare reform has decreased the amount the government spends on welfare.
	d.	The price of computers fell last year.

greencat417

What do you believe is the ultimate impact of technology on job creation? Should there be curbs to the pace of modernization?

(Answer in a paragraph(around 200 words))

What Econ 101 Can Teach Us About Artificial Intelligence

Here's why advancing technology often leads to more jobs for humans, not fewer

A Tesla Model X 75D semi-autonomous electric vehicle is parked at the Governor's Mansion in Olympia, Wash., this year. Goldman Sachs predicts that 25 years from now, driver employment will be growing by 300,000 less per year because of autonomous vehicles.

By Greg Ip

Aug 9, 2017

The first chart you draw in Economics 101 is the downward-sloping demand curve. It shows that when the price of something drops, people consume more of it.

This elementary rule of economics is remarkably helpful in discussing the effects of technological change. As I wrote last week, when technology makes something cheaper, we consume more of it, often by finding new uses. This lesson repeats through history: When coal-fueled steam power became more efficient in the 1800s, demand for steam power and coal spread. When automated teller machines made it cheaper to operate bank branches in the 1980s, banks opened more branches.

My column cites spreadsheet programs like Lotus 1-2-3, whose arrival in the early 1980s made repetitive recalculation vastly simpler and faster. This reduced demand for bookkeepers but created more demand for people who could run numbers in new and interesting ways, such as accountants and management consultants.

In a recent article for the Harvard Business Review, Ajay Agrawal, Joshua Gans and Avi Goldfarb, economists at the University of Toronto who study artificial intelligence, say that in the 1990s, economists didnât buy into the hype that the internet and the World Wide Web would upend everything:

âIt wasnât that we didnât recognize that something changed. It was that we recognized that the old economics lens remained useful for looking at the changes taking place. The economics of the âNew Economyâ could be described at a high level: Digital technology would cause a reduction in the cost of search and communication. This would lead to more search, more communication, and more activities that go together with search and communication. Thatâs essentially what happened.â

They apply that lesson to artificial intelligence and more specifically to machine learning, the use of powerful algorithms to make predictions from patterns in large quantities of data. Machine learning, they say, means many problems will be reframed as prediction problems. Autonomous driving no longer involves programming the car to respond in a certain way to a variety of controlled scenarios, but instead, to watch what humans actually do and then respond the same way.

How does this affect jobs? The authors says it depends on whether the technology competes with or complements what you do. Spreadsheets competed with what bookkeepers do (record keeping and calculation) and thus made them less valuable, but complemented what accountants and consultants do (analysis), and made them more valuable.

Mssrs. Agrawal, Gans and Goldfarb say that AI reduces the value of those who predict things for a living, such as whether a mark on an X-ray is a tumor, but it raises the value of those who use predictions to make judgments:

âWhen prediction is cheap, diagnosis will be more frequent and convenient, and thus weâll detect many more early-stage, treatable conditions. This will mean more decisions will be made about

medical treatment, which means greater demand for the application of ethics, and for emotional support, which are provided by humans.â

So AI will create winners and losers within and among industries and occupations. But what will the net effect be? More jobs or less, and for whom? This isnât knowable, but history suggests that while a specific occupation or industry may suffer losses, the aggregate effects will be positive. The growth in accounting and analytical jobs since the early 1980s is much larger than the loss of bookkeeping jobs.

Nor did all those bookkeepers necessarily lose jobs; many probably became accountants or analysts. As Mr. Gans told me, bookkeepers may have been best placed to exploit the capabilities of spreadsheets: âIf you were doing calculations all day as a bookkeeper, chances are you thought a bit about why you are doing that. When you got a spreadsheet, rather than doing one calculation per day you could do 10 to 50, so you had a better sense of what the [calculations] might say.â

Some readers said AI is a much bigger threat than spreadsheets because it has so many more potential applicationsâand they displace uniquely human abilities. I agree with the first part, less so with the second. I suspect workers in previous eras, whether they drove a horse and plow, handled a stock trade or connected a phone call, thought there was something about their job that a machine could never replace.

Will the disruptions this time around be greater? Maybe, but not necessarily. Goldman Sachs predicts that 25 years from now, driver employment will be growing by 300,000 less per year because of autonomous vehicles. Thatâs 25,000 jobs per month to make up, compared with the 5,000 per month that the decline in bookkeeping since 1985 represents. But itâs hardly insurmountable in a labor market where five million jobs are created and destroyed each month.

Others said I was ignoring the potential for rogue algorithms and robots to turn on us or strip us of our freedom.

The experts, of which I am not one, tell me AI is nowhere near that capability. (Before the robots can kill us they must first stop killing themselves.) And donât assume spreadsheets have been all benign. Excel may not have slain anyone Terminator-style, but it did help wound J.P. Morgan through its role in the âLondon Whaleâ trading disaster.

Which brings me to the final point. We should not confuse what technology enables us to do with how much better off it makes us. Spreadsheets enabled analysts to construct much more intricate forecasts of stock prices and the economy, but didnât make those forecasts any more accurate. AI may enable companies to better manage the risks of their products and actions, but those products and actions may not be more profitable. Many a CEO has wondered whether the money they spend on spreadsheet-wielding consultants yields any real value. Some day they may wonder the same thing about their AI-wielding consultants.

ECON 102 Lecture Notes - Lecture 2: Spontaneous Order, Positivism, Planned Economy

ECON 102 Full Course Notes

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