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Microeconomics Class and Book Notes
Microeconomics Class and Book Notes

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School
Concordia University
Department
Economics
Course
ECON 201
Professor
All
Semester
Fall

Description
Economics and the EconomyChapter1 1WHAT IS ECONOMIC how society decided to distribute scarce resources in determining what how whom to produce forwe have limited resources and we desire an endless quantity of goods and serviceswe tend to understand why some economies grow and why others dont Decisions made by society composed of individuals organizations government Agents We call economics both a science and a social scienceo Science because of method math statso Social Science because its dealing with relationships between agentso Example Our welfare system vs education or employment insurance vs training programs Specifically economics is trying to address what goods services to produce in what cannot ando Ig Coffee Shops and restaurants shopping mallsHow to produce themo Ig Shoes technology or man made and cars For whom to produceo Agents a consumers households food clothingo b firms oil gasc society private goodsand public goods medicareeducation Supplier of public goods government 2RESOURCE ALLOCATIONassigning available resources in an economic wayExample oil market prices increase OPEC Organization of Petroleum Exporting CountriesHow use more fuel efficient thingsWhat switch to solar electricity wind Whom consumers Example 1 Oil market What happens if price of oil increases Consumers take public transit a fuel efficient car less consumption of oil Firms input price increases profit they find alternatives like they will switch to natural gas wind solar or biotecho OPEC organization of petroleum exporting countrieso 1873 they decided to decrease tighten oil supplyo Monoplitarian profit Example 2 Table 1 World Population and income in 2005 What are the key factors for economic growth GDPo 1 Investments capital savingsLevel of educationType of resources Technology Peaceo 2 Institution Property Rights incentives matter Type of government3SCARCITY AND THE COMPETING USE OF RESOURCESa The Economys Production Possibilities Productions Possibility Frontier PPF for each output of one good the maximum amount of the other with given resources and technologyConcave form Straight Line Convex Form Ipads vs PCS Production combinations from point A to BSee graph Opportunity Cost the cost of an activity in terms of value of the best alternativeits the most desirable alternative to get what you wantThe max amount you have to let go in order to get what you wantthe amount of a good or service that must be sacrificed to obtain more of the first onethe PPF with a straight line the opportunity cost will always be the same Example 3 Opportunity cost example Pies or SandwichesCombined PPFJames 0 sandwich8 pies1 sandwich6 pies in order to increase 1 sandwich James has to give up 2 pies 1 sandwich is equivalent to 2 pies Opportunity Cost of 1 Sandwich is 2 Pies For one pie james would have to sacrificea sandwichCost ofa sandwich is 22 piesJohn is more efficient at making piesExample 1 Opportinity Cost ExJackJill Ipad 5 10 Laptops 3 2Opportunity cost of 1 laptop for Jack 5 Ipads 3 Laptops5333 53 Ipads 1 Laptop the opportunity cost for 1 laptop for Jack is going to be equivalent to 53 Ipads Opportunity cost of 1 laptop for Jill10 Ipads 2 Laptops 5 Ipads 1 LaptopWho has a comparative advantage in producing laptopsJack because he can produce laptops at a lower cost compared to JillWho has a comparative advantage in producing Ipads Jill because 10 Ipads 2 Laptop1 Ipad 15 LaptopFor Jack it would be 5 Ipads3laptop 1 Ipads 35 Laptops Production Efficiency the economies resources are being fully utilizedevery point on the PPF is an efficient pointpoints inside the PPF are not efficient because theyre not being fully usedpoints outside the PPF are not attainable b Expanding the Production Possibilitiesour economy has grown for several reasons1 We have more capital2 More people working3 Technological Improvements4 People are more educated and skilled c Opportunity Cost and Comparative Advantage As Guiding Principlesdifferent individuals have different opportunity coststrade your skillsby joining you save timeComparative Advantages ability to supply a product at a lower cost than a4THE ROLE OF THE MARKET Markets buyers and sellers to make tradeWe have 3 types of markets1Free Market The Invisible Hando governments dont intervene
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