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ECON 208 - Notes, week of Sep 8

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Economics (Arts)
ECON 208
Lee Ohanian

Adrienne Pacini ECON 208 WEEK September 8 2009 Production Possibilities Boundary A point on the boundary indicates that all resources are being usedA point inside the boundary indicates unemployment all resources not usedA point outside the boundary is not attainableMarginal decisions choice is based on these decisions Unequal adaptability of resources specialization in goods and services that have a comparative advantage Four Key Economic Problems 1 What is produced and howResource allocation quantities producedWill the economy be inside the limits of the production possibilities boundary 2 What is consumed and by whomWhat determines how economies distribute total outputWill we produce what we will consume 3 Why are resources sometimes idle 4 Is our productive capacity growingParticipation rate specifically women after WWIIGrowth in productivity per workerIncrease in recent years due to flexible manufacturing outsourcing and lean productionIncome equality maintained by tax progression and transfer paymentsThe Complexity of ProductionSpecialization more efficient individual abilities differ o Comparative advantage o Allocation of jobs to different people o Focusing on one activity learning by doing Ongoing ChangeJob structureo More people working in the service industry o As average income grows a higher proportion is spent on servicesNew technology and products o Improves living standards o Trying to decrease carbon footprintGlobalization rapid reduction of transportation and communication costsLower tariffs eliminating trade barriersTNCs are more commonSpecialization must be accompanied by trade The Great DebateKarl Marx a freemarket would maximize output but wouldnt ensure equal distribution among allFreemarket economies couldnt be relied upon to generate a just distribution of output Marx argued the benefits of a centrallyplanned economyo However these countries could not keep up with the standard of living of other freemarket economiesThe failure of central planning shows the superiority of mixed economies
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