Escolar Documentos
Profissional Documentos
Cultura Documentos
Instructional Method
Primarily Lecture format with discussion, simulations, and video presentations Constructive discussion is welcomed Grading is based on five mini-exams and Aplia Homeworks. NO MAKEUPS GIVEN Professor available during office hours and by appointment Suggestions for the study of economics
What is Economics?
Scarcity a basic human dilemma
Limited resources vs. unlimited wants The human condition requires making choices
Definitions of Economics
Mankiws definition
is the study of how society manages its scarce resources
Hedricks definition
is how society chooses to allocate its scarce resources among competing demands to improve human welfare
Alternative definitions
what economists do. is the study of choice.
Fundamental Questions of Economics - Scarcity requires all societies to answer the following questions:
What is to be produced? How is to be produced? For whom will it be produced
WHFM Questions
Rational Behavior
Weighing benefits and costs and maximizing total net benefits Marginal vs. Total Thinking
Bias towards use of natural rather than controlled experiments The specialized language of economics (e.g. He has lots of money.)
Money medium of exchange Wealth accumulated financial and non-financial assets Income the purchasing power earned during a given period
Normative Economics
Prescriptive - what the world ought to be like Subjective value judgments must be made Normative statements cannot be tested appealing to facts.
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Principle #4 People respond to incentives
Reactions to changes in marginal benefits and costs Increases (decreases) in marginal benefits mean more (less) of an activity Increases (decreases) in marginal costs mean less (more) of an activity Example of seat belts leading to increased speeds Example of SUV (with child car seat) in Issaquah
Markets
Principles 1-5 combine with markets to turn the pursuit of self-interest into promoting the interests of society Adam Smith and the invisible hand creativity and productivity are stimulated by the pursuit of self-interest into improving resource allocations set it and forget it becomes compete or be obsolete in some cases markets fail to allocate resources effectively so,
markets may also fail to provide an equitable or fair distribution of resources government intervention with its ability to coerce (the opposite of voluntary) can regulate, tax and subsidize to change market outcomes efficiency and equity: the pie analogy if government intervention always the proper solution?
the factors of production: land or natural resources, labor, capital, entrepreneurship technology and productivity the rule of 72 for growth rates
Principle #9 The general level of prices rises when the government prints and distributes too much money
definition of money, the concept of snow to Inuits, and economic language inflation is an increase in the general or average level of prices in an economy not worth a continental and recent example in Argentina the establish of the Federal Reserve and the introduction of sustained inflation in the US
Principle #10 Society faces a short-run tradeoff between inflation and unemployment
Short-run and the long-run demand and supply shocks short-run increases (decreases) in output above (below) long-run potential output lead to adjustments countercyclical stabilization versus pro-cyclical destabilization political business cycles