CAS EC 101 Chapter Notes - Chapter 1: Risk Compensation, Marginal Cost, Lifesaving

35 views1 pages

pucesnail607

11 Sep 2017

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

tealzebra3 and 39199 others unlocked

CAS EC 101 Full Course Notes

Verified Note

56 documents

Document Summary

Economy greek one who manages a household . The study of how society manages its scarce resources. Scarcity society has limited resources and cannot produce all goods and services people wish to have. Efficiency property of society getting the most it can from its scarce resources. Equality distributing economic prosperity equally among society members. Opportunity cost what you give up to get something. Rational people people who do the best they can to achieve their objective given available opportunities. Marginal change small incremental adjustments to existing plan of action. Incentive something that pushes people to act. Peltzman effect stating people react to safety regulations by engaging in other risky behaviors. Seatbelt regulations lead people to drive more recklessly, having the increased accident rate balance out the lives saved by seatbelt wearing. How people make decisions: people face trade-offs.

Related Questions

Need help revising, and recommendation for a conclusion.

Throughout this paper is my understanding of what I have learned in class chapters 1-4, expressing my understanding and opinions. Economics is the study of how we deal with scarce resources. Microeconomics specially deals with business in the home country exclusively. This type of economics affects small businesses in the home country only. On the other hand, macroeconomics concerns our national welfare concerning trade and international business.

I believe that many things affect our economy on a microeconomics level. Things such as our understanding of our country in reflection to the world are very important. That is why we study ourselves before we study the macroeconomic principle of the world. Understanding ourselves is what microeconomics teaches us. Working from the inside out. The world is a place where there are differences in our wants and what we get. That is what makes items scarce. That is what positive economics is. Positive economics deals with what is and what we have. The other type of economics is called normative statements. This deals with what we should receive instead of what is and deserved to some extent. It's our scarce resources that determine our allocation of resources and how we use our resources and time. This is where opportunity costs come in, giving up something to do something. A successful business or country never ignores opportunity costs. We must ensure that we have a comparative advantage instead of the absolute advantage. Our resources must be used to achieve maximum output. Comparative is met when we have fewer opportunity costs to make some certain products than the other person or entity.

My initial understanding was scarcity was oil potentially running out, but we have so much of it that you can always find more with techniques such as fracking. Now it's obvious to me, one of our most scarce resources is time. You cannot avoid the 8,760 hours in a year. I understand that people have unlimited wants but limited resources. Everything has a cost and we must make a choice as we don't have unlimited farms, factories workers, etc. scarcity forces choices and this ties in with opportunity cost, for every gun made, a theft from the hungry is made. The opportunity cost not being used to feed the poor, but to make guns. And I find it easy to understand no one can have everything choices must be made on benefits. If I'm going to school, imp giving up making cash, as I'm giving up money for an education, I value education more. Scarcity is also related to the invisible hand. As it's an achievement that leads free markets and capitalism through competition for scarce resources.

My understanding of the invisible hand is a person neither intends to promote public interest and does not know how much he is promoting it. Only intending on his own gain. Without being his intention a person can be lead by the invisible hand to do good for society by pursuing one's own self-interest. Going into equity and efficiency the invisible hand does ensure both equity and efficiency. People work in their selfish ways to maximize profit while also contributing to the economy as a whole. It can also be argued that as the invisible hand wants to ensure efficiency, it cannot guarantee efficiency, because it can fail to produce an efficient allocation of resources, which in turn lead to a market failure. It can also be argued that it can't guarantee equity because not everyone gets a fair price. The way I like to remember efficiency is with a real-life example, like a reduction in the number of workers needed to produce a particular good for a particular amount. Equity refers to the ownership interest in an asset, for example, if a person owns a house with a market value of $800,000 and owes $100,000 on the mortgage leaving a $700,000 equity in the home.

It can be predicted that if the price of beef increases - ceteris paribus-the quantity of beef demanded by buys will decrease. In other words, if the price of beef increases, then the quantity of beef increases, then the quantity of beef demanded will decrease because all things have to be equal. In-class lecture thought me all other things remaining the same. Economists use ceteris paribus to determine the effect of a factor when all other factors have been held the same and helps simplify the study and get a more refined data set.

Economists deal with many issues that pertain to assuring that both a countries domestic output is efficient and that there is an effective trade balance. This means that there are a balance and limit on the amount of imports. Also, this means home production must be able to meet export demands. There are many factors that affect the production of goods and their effect on shifting the production possibilities frontier. This involves evaluating every detail including knowing the products and any close substitutes and compliments. It also involves knowing how an action or other external force will affect demand. This is called price elasticity; Substitutes are products that can replace any given product or service. An example of this would be Coke and Pepsi. The presence of substitutes affects price elasticity because if there are other options, then any change to the price or quality of the product will cause a shift of the demand curve. O course, price is a huge reason why the demand for a product decreases or increases yet it doesn't shift the curve because of the price only. This price change will cause a domino effect that will end with the shifting of the demand curve because it will cause an increase or decrease in demand of the substitute good if the price change is either lower or higher respectively. This price change serves as a catalyst that will change people's desire to spend more money on a more expensive product and that will instead choose to buy the substitute good for cheaper or buy more of the desired product. The change in the price of actual products will not shift the demand curve yet the change of the price of substitutes will because it serves to change people's purchasing behavior. On the other hand, compliments serve to boost demand when there is a decrease in price. The use of complementary goods is dependent upon another product. An example of this would be hot dogs and buns. If the price of hotdogs decreases then, conversely, the demand for hot dog buns will increase because of this change in price. In this scenario, the decrease in price will cause a positive shift in the demand curve because of people's desire and willingness to buy more buns. This is an example of a demand shifter. There are a few other demand shifters. The shifters of the demand curve are changes in expectations, disposable income, price of substitute goods and complements, tastes and preferences, and population size and composition. Changes in income affect the demand curve because if income is lower then people tend to save any extra income instead of wasting it. Disposable income is minimized and spending is lower. This also causes people to see a perceived value of things and distinguishing between what is necessary and what is a relative luxury. The lower the income, the higher the saving and avoidance to spend. An example of this would be if someone needs to buy some medication and it is relatively expensive, that doesn't mean that someone won't buy the medication just because it is expensive. It is necessary. Other factors that contribute to spending and demand are having a price ceiling and price floor. Having a price ceiling is a limit on the price of the product this is a government-imposed idea that is meant to protect consumers from unfair pricing and other conditions that may be malicious or obscure. This affects demand because if there is a price ceiling there is a limit on profit on a unit-to-unit basis. The other factor is the price floor. This price floor was created to encourage competition and affect consumers' willingness to pay because sometimes this new price may be higher than the original price. This causes a negative impact on a product that has a less than wanted perceived value. Many factors contribute to economic prosperity and certainly do help assure that information is analyzed and implemented into an economic and business plan.

limejellyfish231

Person	Judy	Sandy	Dee	Shawntae	Martha
Income	$40,000	$75,000	$85,000	$35,000	$110,000

The above table lists the incomes for the 5 people who live on the remote island nation of Richland.

1. Refer to Table 21.1. If Martha's income doubled to $220,000 while the incomes of the other four residents did not change, what would happen to the original median income onâ Richlandia?

A.It would increase by $22,000.

B.It would increase by $44,000.

C.It would not change.

D.It would double.

2.When we compare shares of income earned by U.S. households over the past 40 years, which of the following statements about the distribution of income isâ true?

A.The percentage of total income represented by each quintile has decreased.

B.Lower income households gained at the expense of higher-income households.

C.The largest gain in income percentage is in the top 5% of households.

D.The percentage of total income represented by each quintile has increased.

3.From 1970 to 2012, the Gini coefficient in the United States has

A.dramatically decreased.

B.remained is relatively unchanged.

C.steadily increased.

D.more than doubled.

4.Income distribution in the United States over the past 40 years has become more equal.

True

False

5.Income inequality in the United States has increased in part due to technological change. How does technological change contribute to incomeâ inequality?

A.It is responsible for a majority of new products on the market, and these products are only affordable to higher-income households.

B.It reduces the cost of producing goods and therefore lowers the value of labor services.

C.It allows manufacturers to produce products with lessâ labor, and this reduction in the demand for labor lowers wages at all skill levels.

D.It has created many higher-income jobs for skilled and trainedâ workers, leaving the income of less-skilled workers relatively unchanged by comparison.

6.Income inequality in the United States has increased in part due to globalization. How does globalization contribute to incomeâinequality?

A.It allows domestic firms to hire low skilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of low skilled workers to fall relative to the wages of other workers.

B.It increases the demand for a wide variety of products which in turn increases prices beyond the reach of average income

households.

C.It allows producers to exploit workers and reduce the wages they are willing to pay those workers.

D.It reduces the cost of producing goods and therefore lowers the value of labor services.

7.Rachel, a large pineapple producer in Hawaii, lobbies Congress to limit imports of pineapples to be able to sell her pineapples at a higher price and greatly increase her income. This possible source of income inequality is due to

A.technology changes.

B.rent seeking.

C.globalization.

D.productivity differences.

8.If growing income inequality results from changes in technology that, as a whole, make society better off, this will

A.decrease the size of the economic pie because of income inequality.

B.increase the size of the economic pie.

C.not change the size of the economic pie because the positive technology changes will be offset by the increases in income inequality.

D.result incomplete income inequality as technology continues to change in the future.

9.The belief that having more of something makes you happier but in successively smaller increments is called

A.utilitarianism.

B.diminishing marginal utility.

C.the benefits received principle.

D.transcendentalism.

10.The results of a survey conducted by Dan Ariely and Michael Norton found that Americans

A.show absolutely no preference for the amount of equality in wealth distribution in the nation.

B.have a preference for much less equality in wealth distribution than currently exists.

C.have a preference for roughly the amount of equality in wealth distribution that currently exists.

D.have a preference for much greater equality in wealth distribution than currently exists.

11.In the United States, the highest quintile of income earners contribute ________ of all federal tax dollars received, and the lowest quintile of income earners contribute ________ of all federal tax dollars received

A. 24%; 1.5%

B. 20%; 20%

C. 68.8%; 0.4%

D. 29.4%; 11.5%

12.The question "Is the U.S tax system disproportionate enough?" is a ________ question, and the question "How would higher taxes make the rich behave?" is a ________ question.

A. normative; positive

B. positive; normative

C. positive; positive

D. normative; normative

amaranthgoat434

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

CAS EC 101 Chapter Notes - Chapter 1: Risk Compensation, Marginal Cost, Lifesaving

CAS EC 101 Full Course Notes

Document Summary

Get access

Related Documents

CAS EC 101 Study Guide - Final Guide: Traffic Congestion, Marginal Cost, Fiat Money

CAS EC 101 Lecture Notes - Lecture 1: Takers, Market Power, Physical Capital

CAS EC 101 Lecture Notes - Lecture 1: Capital Formation, Physical Capital, Human Capital

Related Questions