econ notes

CHAPTER 1:1

Economics: study of humans behavior looking at unlimited wants and needs met with limited resources

Utility: additional/extra satisfaction

3 main questions: what, how, and whom to produce

 Opportunity cost: the most desired alternative

Tradeoff: all of the alternative things you could be doing

Gross domestic product (GDP): the monetary value of all final goods, services, and structures produced within a country’s borders in a 12 month period. 2nd hand things do not count.

1:2

Trade-offs: Each of the alternative options given up when making a decision

Opportunity cost: The most desired trade-off of a decision

Factors of production(producer)

• Land
• Labor-the people working on the farm
• Capital-tracker
• Entrepreneurship- serving and observing the farm RND( knowledge and hardship that went into the farm)

PPC- a diagram representing all the possible outcomes of goods and services. Theoretical graph. Concave curve

• Any point along the curve is called efficient
• 

Opportunity cost- each existence moving from one space to the next one and greater impact. Eg-moving worker in the class.

Straight-line PPC- constant curve is the constant opportunity cost

Movement-along the curve (A to B) moving resources from one area to another

Shift- outward or inward( entire curve forcing inward or outward or one end is moving out)

Consumer rights

• The right of safety- production against the dangerous goods
• The right to be informed-receive info that can help decision making
• The right to choose- protection in markets that have different levels of competition. Choose Different brands
• The right to be heard- consumer interests are considered
• The right to redress- receive adequate payment from producers if harmed

1:3- Using Economic Models

• Economic Growth- Total output of goods and services increases over time.
• 4 factors of economic growth- land, labor, capital, and entrepreneurship
• Example of economic growth- when a country increases the gross domestic product(GDP) per person
• Causes of economic growth- two main sources are growing in size of the workforce and growth in the productivity of that workforce. Either can increase the overall size of the economy but only strong growth can increase per capita GDP and income.
• Increases in productivity- Measure of the number of goods and services produced with a given amount of resources in a specific period of time.

The importance of human capital

• Human capital- the sum of people’s skills, health, and motivation.
•   How to improve- education, training programs, financial aid, health care, etc.

Division of labor and specialization

• Division of labor- Separate tasks to be performed by different workers
• Specialization- Assignment of tasks to workers, factors, regions, or nations that can perform the most efficiently.

Circular flow of economic activity

Thinking like an economist

• Economic models- a simplified version of complex concepts or behaviors
• Coast benefit analysis- comparison of cost of an action to its benefits.

How does the study of economics help you make better choices?

• Free enterprise economy- privately owned businesses have the freedom to operate for a profit with limited government intervention(what, how, for whom)
• Standard of living- the quality of life based on ownership of necessities and luxuries that make life easier.

CHAPTER 3

3-1

Capitalism thrives on competition

- Struggle to attract consumers

- Buyers compete to find the best products at the lowest price

Characteristics of a free enterprise capitalism

Free enterprise- resources are privately owned and competition is allowed to flourish with minimum government intervention

• Economics freedom- choose occupation and employer. Have own business or work for someone else. Businesses have the freedom to hire the best workers. It has the freedom to produce goods and services they think will be most profitable.
• voluntary exchange- buyers and sellers freely and willingly taking part in transitions. Both buyers and sellers are better off after the transitions.
• Private property-people have the right to control possessions as they wish. Right to use and abuse property as long as it does not impact others. The incentive to work, save and invest.
• Profit motive- a driving force that allows people and businesses to improve material well-being. people are free to risk their wealth in business ventures. Can lose wealth and earn rewards.
• Competition- competition thrives on competition. Struggle between buyer and seller to get the best product at the lowest price. Completion between sellers keeps costs lower and high quality. Consumers compete to find the best product at the lowest price.

Benefits of the free enterprise system

Individual freedom of consumers and producers

Vanity of goods

Adapting to change

Promoting progress

Creation of wealth.

Disadvantages of the free enterprise system

Uneven economics of growth: business cycle

Growing gaps between rich and poor: rich get richer and poor get poorer.

Large “supply-side” tendencies: work best when there are a large # of buyers/sellers. Do not want monopolies

Rights and responsibilities of business: protects consumers from harmful products.

3-2- roles and responsibilities in a free enterprise economy

• The role of entrepreneur- one of the most important people in the economy. Organizes land, labor, and capital to gain profit. Search for profit(new products, great competition, higher quality, lower prices, etc)

Role of consumer- consumers have the power they vote with dollars. Producers are rewarded for profits,

• Consumer sovereignty- desires and needs of consumers control the output or producers.

4 roles of government

• 1 protector- stops unsafe/misleading products. Enforce laws against individual freedoms(FDA)
• 2 provider and consumer- government provides goods and services for citizens. Eg- national defense, libraries. In the process, the gov. Consumers factors of production like any business
• 3 regulator- gov. Is charged with preserving competition in the marketplace. Tries to ensure follows “the rules of the games” to ensure an efficient and fair economy.
• 4 promotor of national goals- gov. Reflects the goal of the majority of its people. Gov. Programs such as social security, child labor laws, and minimum wage reveal how Americans have modified their free enterprise economy.

Mixed or modified free enterprise

Cuz of this modification, the U.s is said to have a mixed economy.