ECON101 Chapter Notes - Chapter 5: Natural Disaster

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browncrocodile545

29 Sep 2018

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Corey Van De Waal

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ECON101 Full Course Notes

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Economists agree about efficiency; they agree that it makes sense to make the economic pie as large as possible and to produce it at the lowest possible cost. But they do not agree about equity; they do not agree about what are fair shares of the economic pie for all the people who make it. All ideas about fairness can be divided into two broad groups: It is not fair if the result is not fair. It is not fair if the rules are not fair. Income can be transferred from people with high incomes to people with low incomes only by taxing the high incomes. Ta(cid:454)i(cid:374)g people"s i(cid:374)(cid:272)o(cid:373)e f(cid:396)o(cid:373) e(cid:373)plo(cid:455)(cid:373)e(cid:374)t (cid:373)akes them work less. Everything that is valuable must be owned by individuals and that the state must ensure that theft is prevented: private property may be transferred from one person to another only by voluntary exchange.

Related Questions

Topic:
How would you explain the finding that people in high-income economies seem happier than people in low-income economies, but, over time, people in high-income economies do not seem to be any happier even if their country grows richer? Briefly discuss.

Optional Reading:

Income and Happiness

The Declaration of Independence in 1776 identified âcertain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.â This did not guarantee happiness but did establish the pursuit of happiness as an âunalienableâ right, meaning that right cannot be taken away, given away, or sold. Eighteenth century philosopher and social reformer Jeremy Bentham argued that government policy should promote the greatest happiness for the greatest number of people.

Many people today apparently agree. In recent polls, 77 percent of Australians and 81 percent of Brits believed that a government's prime objective should be promoting the greatest happiness rather than the greatest wealth. The United Nations in 2007 sponsored an international conference on âHappiness and Public Policy.â Thailand now compiles a monthly Gross Domestic Happiness Index. Even China has joined in the fun reporting a happiness index based on polling results about living conditions, income, the environment, social welfare, and employment. Australia, Canada, and the United Kingdom are also developing happiness indexes.

Economists have long shied away from asking people how they feel, preferring instead to observe their behavior. But more now see some value in asking questions. In the most extensive of polls, the Gallup organization asked people in 130 countries: âHow satisfied are you with your life, on a scale of zero to ten?â The results, reported in 2007, are not surprising. Most people in the high income areas, such as the United States, Europe, and Japan, said they are happy. Most people in the poor areas, especially in Africa, said they are not. Also, within a given country, income and happiness are positively related. After evaluating all the results of the Gallup world poll, Angus Deaton of Princeton concluded: âThe very strong international relationship between per capita GDP and life satisfaction suggests that, on average, people have a good idea of how income, or the lack of it, affects their lives.â 8

So these results are no surprise. What does puzzle economists is that other surveys suggest that in affluent countries people do not seem any happier over time even though each generation became richer than the last. For example, in the United States, the proportion of people who say they are happy has stayed about the same despite 60 years of economic growth. In Japan, happiness responses actually declined despite a substantial increase in real income over the last 50 years.

Here are two possible explanations. First, people begin taking for granted those luxuries they most desired. For example, two generations ago color TVs, automobiles, and major appliances were luxuries, but now they are must-items for most households. Computers and flat screen HDTVs will soon move from luxuries to necessities. As each generation attains a higher standard of living, people become less sensitive to the benefits, they take them for granted, and thus they say they are no happier.

Second, research suggests that what matters is not just the absolute level of income but income relative other people in the reference group. Imagine you have a choice between (1) earning $50,000 a year while others in your reference group make $25,000 or (2) earning $100,000 a year while others make $250,000 (suppose, too, that prices remain the same, so $100,000 is double the real income of $50,000). Which would you prefer? Studies show that when people face this hypothetical choice, most pick the $50,000 option. That is, they prefer to make more than others even if that means a lower real income. Thus, if all incomes rise on average over time, this does not affect that aspect of happiness linked to oneâs relative standing. As the social critic H. L. Mencken long ago observed, "A wealthy man is one who earns $100 a year more than his wife's sister's husband."

SOURCES: Daniel Gilbert, Stumbling On Happiness, (New York: Knopf, 2006); Marina Kamenev, âRating Countries for the Happiness Factor,â Business Week, 11 October 2006; Angus Deaton, âIncome, Aging, Health, and Wellbeing Around the World: Evidence from the Gallup World Poll,â Princeton Working Paper, (August 2007); and âWhere Money Seems to Talk,â Economist, 12 July 200

21. The English word that comes from the Greek word for "one who manages a household" is

A- market
B- consumer
C- producer
D- economy

Question 22. 22. For a college student who wishes to calculate the true costs of going to college, the costs of room and board

A- should be counted in full, regardless of the costs of eating and sleeping elsewhere.
B- should be counted only to the extent that they are more expensive at college than elsewhere.
C- usually exceed the opportunity cost of going to college.
D- plus the cost of tuition, equals the opportunity cost of going to college.

Question 23. 23. The phenomenon of scarcity stems from the fact that

A- most economies' production methods are not very good.
B- in most economies, wealthy people consume disproportionate quantities of goods and services.
C- governments restrict the production of too many goods and services.
D- resources are limited.

Question 24. 24. Central planning refers to

A- markets guiding economic activity. Today many countries that had this system have abandoned it.
B- markets guiding economic activity. Today many countries that did not have this system have implemented it.
C- government guiding economic activity. Today many countries that had this system have abandoned it.
D- government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 25. 25. Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

A- we should agree with Senator Brown.
B- we should agree with Senator Johnson.
C- a good decision requires that we recognize both viewpoints.
D- there are no tradeoffs between equity and efficiency.

Question 26. 26. Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information, it follows that

A- they should leave the price at $10.
B- it does not matter if they charge $10 or $15.
C- they would do better charging $15 than $10.
D- they should raise the price even more.

Question 27. 27. A circular flow diagram is a model that

A- helps to explain how participants in the economy interact with one another.
B- helps to explain how the economy is organized.
C- incorporates all aspects of the real economy.
D- Both (a) and (b) are correct.

Question 28. 28. In the markets for goods and services in the circular-flow diagram,

A- households provide firms with savings for investment.
B- households provide firms with labor, land, and capital.
C- firms provide households with output.
D- firms provide households with profit.

Question 29. 29. Incomes of U.S. households in the 1970s and 1980s

A- grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades.
B- grew rapidly, due to several increases in the minimum wage during those decades.
C- grew rapidly, due to government policies that discouraged the importation of foreign products during those decades.
D- grew slowly, due to the slow growth of the output of goods and services per hour of U.S. workers' time during those decades.

Question 30. 30. For economists, statements about the world are of two types:

A- assumptions and theories.
B- true statements and false statements.
C- specific statements and general statements.
D- positive statements and normative statements.

marooncat628

My response " I agree that the government should only be involved when it is absolutely needed or when there is more on a state's plate than they can handle. The thing that I keep in mind is that the states that make up the United States are free states and that matters concerning the states such as economic growth belong to the state. There are times such as recently the Great Recession and even further back in history, the Great Depression placed more on the states than they could handle. As a result, the government should have, just as it did, step in and do what they can do. Although recovery from the Great Recession is slow going it is still happening. As far as the Great Depression if it had not been for the government then we may still be trying to get over that."

Instructors question "I (we?) am unclear on your claim, "There are times such as recently the Great Recession and even further back in history, the Great Depression placed more on the states than they could handle." Just what were "the states" supposed to do that you believe they did not do or were incapable of doing to prevent the Great Recession? Also Calvin, the reference notation you listed did not have matching citations. Where then would you place them? "

Please help me with the response to the instructor's question.

scarletjellyfish335

ECON101 Chapter Notes - Chapter 5: Natural Disaster

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