ECON 3 Study Guide - Summer 2018, Comprehensive Midterm Notes - Vocab Song, Unlimited Company, The Mighty Handful
ECON 3
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Lecture 1
Vocab (Ch 7):
- GDP: Gross Domestic Product
- NDP: Net Domestic Product
- NI: National Income
- PI: Personal Income
- DI: Disposable Income
Economics:
- A social science concerned with making optimal choices under conditions of scarcity
- Economic wants to exceed society’s productive capacity
o AKA siee of deisio-akig
o Optimal = best; scarcity = lack of, limitations
Scarcity (What makes it worse):
- Unlimited Human Wants
- Inefficient use of resources
o Resources are not used properly
- Misallocation of resources
o Resources are not distributed correctly (unemployment)
▪ Ex: Engineer driving Taxicab
o Caused by lack of investors and lower income countries
Microeconomics and Macroeconomics (pg 8):
- Microeconomics: The study of the individual consumer, firm, or market
- Macroeconomics: The study of the entire economy or a major aggregate of the economy (4
sectors)
o Behavior of individual economic units
▪ Ex: Amazon building another HQ
Economic Systems:
- Set of institutionalized arrangements
- Coordinating mechanism
- Differences eist …
o Degrees of decentralized use of markets and prices in decision-making
o Degree of centralized governmental control
▪ Type of economic system in America? Market System
The Command System (pg 32-33):
- AKA socialism or communism
- Government ownership of resources
- Decisions made by a central planning board
o Ex: Korea, Cuba, Myanmar
The Market System (America)
- Def: A mix of decentralized decision-making with some government control
- System found in much of the world
- Private markets are dominant force
- Private ownership or resources
- Self-interested behavior
find more resources at oneclass.com
find more resources at oneclass.com
Economic Systems (4)
- Individual Capitalism
o AKA Free-Market Economy
▪ Ex: US, UK, Hong Kong
o Incentive to work is very high because rewards are unlimited (No limit to unlimited
ambition)
o Little government intervention
o Easy to start up business
- Communion capitalism
o State-directed Free Market Economy
▪ Ex: Germany, Japan, South Korea
o Difference from Individual Capitalism: Rewards are limited for individuals
▪ Ensures success, people have to show they can run a business
- Command Socialism
o AKA communism (Repressed economy: complete government intervention)
▪ Ex: USSR
o cvxrGovernment controls all the people and their successes
- Mixed Economy
▪ Ex: Northern Europe: Finland, France, Sweden, etc...
o Some government run and some private run corporations
▪ Utilities: education, electricity, et…
o Incentive dependent on government
o Websites for reference:
▪ HeritageFoundation.org
▪ Degreeofeconomicfreedom
Characteristics of the Market System
- Private Property: Legal for individuals to own their own stuff without government intervention
- Freedom of Enterprise: Private corporations are free to get resources and use them however
they want to produce whatever they want
- Freedom of Choice: Individuals and businesses are allowed to purchase and sell whatever they
want
- Self-Interest: Drives the market economy with the idea that individuals and businesses capitalize
utilization of money
- Competition: Also a driving force in the absence of government regulation – Businesses
compete with each other for consumers
o → Businesses increase quality for lower price for more consumers
- Market and Prices: Market is made of buyers and sellers and outcome of self-interests is price.
Prices allow buyers and sellers to make decisions according to their own self-interest
Economics: Economic Goals and Social Goals
1) Economic Efficiency
2) Economic Freedom
3) Economic Security and Stability
4) Economic Equity and Fairness
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
A social science concerned with making optimal choices under conditions of scarcity. Economic wants to exceed society"s productive capacity: aka (cid:862)s(cid:272)ie(cid:374)(cid:272)e of de(cid:272)isio(cid:374)-(cid:373)aki(cid:374)g(cid:863, optimal = best; scarcity = lack of, limitations. Inefficient use of resources: resources are not used properly. Misallocation of resources: resources are not distributed correctly (unemployment, ex: engineer driving taxicab, caused by lack of investors and lower income countries. Microeconomics: the study of the individual consumer, firm, or market. Macroeconomics: the study of the entire economy or a major aggregate of the economy (4 sectors: behavior of individual economic units, ex: amazon building another hq. Decisions made by a central planning board: ex: korea, cuba, myanmar. Def: a mix of decentralized decision-making with some government control. Individual capitalism: aka free-market economy, ex: us, uk, hong kong. Incentive to work is very high because rewards are unlimited (no limit to unlimited ambition: little government intervention, easy to start up business.
