Economics: The Science Of How People Deal With Scarcity

Submitted By dezzbee
Words: 889
Pages: 4
Open Document
Economics Notes

Part 1: Economics: The Science of How People Deal with Scarcity
-Economics studies how people deal with scarcity and the inescapable fact that our wants typically exceed the means available to satisfy them
Everyone deals with constraints and limitations
Scarcity can occur with money, resources, time
-18th century industrial revolution
Process of rapid innovation, lead to invention/exploitation of electricity, engines, complicated machines, computers, radio, television, biotechnology, scientific agriculture, antibiotics, etc.
Factors:
Democracy
More likely to invest if investment is protected by law instead of tyrant
Governments in democratic era have better incorporated the views of merchants/manufacturers
Limited liability corporation
Investors only lose amount of their own investment, not liable for debts corporation can’t pay
Reduced risk of investing
Patent rights to protect inventors
Inventors have the exclusive right to market and sell their inventions, instead of having their ideas stolen
Financial incentive to invent, even became a full-time job
Widespread literacy and education
Educated inventors needed to invent and educated work force needed to mass produce inventions/products

-Separating Macroeconomics and Microeconomics
Macroeconomics looks at the economy as an organic whole, concentrating on economy wide factors like interest rates, inflation and unemployment. Also looks at the study of economics growth/how governments use monetary and fiscal policy to try to moderate the harm of recessions
GDP (Gross Domestic Product)- value of all goods and service produced in the economy in a given time period, usually quarter or year
Vital because you must be able to measure how the economy is doing so you can determine whether government policies are effective or not
Inflation- measure how the economy changes over time
High inflation rates usually bring huge economic problems such as deep recession/countries defaulting on their debts
Government policy is the sole reason for high inflation rates, so government are 100% responsible
-Recessions linger only because institutional factors in the economy make it hard for prices to fall, or else recessions would quickly resolve themselves, so economists have had to develop anti-recessionary policies
2 things that help (first introduced by John Maynard Keynes in 1936)
Monetary policy uses changes in the money supply to change interest rates in order to stimulate economics activity. So if the government causes interest rates to fall, more people borrow money to buy things like houses and cars which stimulates economics activity and gets the economy moving
Fiscal policy refers to increased government spending or lower tax rates to help fight recessions. So if the government buys more goods/services, economic activity increases; or if the government cuts tax rates, people have higher post tax incomes, and increase economic activity by spending that money
Monetary/fiscal policy are constrained in their effectiveness by rational expectations, the idea that people often change their behavior in response to policy changes in ways that limit the effectiveness of those changes

Microeconomics looks at individual people/businesses and explains how they behave when faced with decision about where to spend/how to invest. Also looks at how profit maximizing firms behave individually/when they are competing with other markets
-Economists love profit maximizing firms because the must compete which satisfies 2 conditions:
Competitive firms are allocatively efficient, which means they produce goods/services that consumers want most
Competitive firms are productively efficient, meaning they produce goods/services at the lowest possible cost
Basis of invisible hand idea, that
Show More

Related Documents: Economics: The Science Of How People Deal With Scarcity

Notes On Economics

Economics oikos to managenemo house - social study - teaches how to use efficiently scarce resources (human, capital, money, resources) Micro-economics using resources at a firm’s level Macro-economis using resources at a national level (federal/provincial) Types: Analytical/Positive - based on facts ex. Inflation rate, growth rate, unemployment rate - normative based on opinion Fallacy - a statement that appears to be true but is not a) Fallacy of Composition - what is…

Words 8231 - Pages 33

Notes On Economics

Annie Nguyen Per.5 FINAL STUDY GUIDE Traditional economy: Economic system in which the allocation of scarce resources and other economic activities are based on ritual, habit, custom. Corporation: Form of business organization recognized by law as separate legal entity. General partnership: Form of partnership where all partners are equally responsible for management, debt. Economic goals: Freedom, efficiency, equity, security, employment, stability, grown, future goals. Substitutes: Competing…

Words 1022 - Pages 5

Notes On Economics

is “log linear”. b) “Own” price elasticity is a measure used in economics to show the responsiveness or elasticity of quantity demanded of a good or service to change in price. That is, it gives us the percent change in quantity demanded in response to a percent change in price. To derive: є = [pic]=[pic] c) No. From the perspective of a statistician, the graphical representation of economic supply and demand models is incorrect. In the case of Statistics…

Words 583 - Pages 3

Notes On Economics

Demand Demand- Quantities that consumers are willing and able to buy per period of time at various prices Law of demand- Higher the price= lower the quantity purchased Demand curve- Shows relationship for a product or service- can be linear or curved Change in quantity demanded- Change in price of product resulting in the change in quantity demanded Ceteris Paribus- Demand is the relationship between the price of a product and the quantities demanded Demand schedule- Amounts per week/time…

Words 515 - Pages 3

Economics Essay Notes

Inflation 10. Inequality 11. External stability 12. Environment 13. Fiscal Policy 14. Monetary Policy 15. Microeconomic Policy 16. Labour Market 1. Globalisation Analyse the impact of changes in the global economy (globalization) on Australia’s economic performance • Intro o Context – 30 years, increase in integration of economies, increases in trade, financial flows, rise of TNCs o Definitions • Features of globalization o Trade Flows o Financial Flows o Trans National Corporations o International…

Words 6401 - Pages 26

Economics Notes Essay

Taxation. Comparative Advantage. “On Foreign Trade”. Corn Laws. d. Hecksher-Ohlin (1930s). Builds on comparative advantage. II. Goals of International Economics: To understand; a. Gains from trade. b. Patterns of trade. c. Autarcic Policies and their implications. d. Exchange rates. e. Policy formulation. f. Flow of funds. III. A Quick Note on Monetary Issues. Chapter 2: World Trade I. Size of Global Trade. a. It’s an excess of 20 trillion. b. Major US trade partners; 1. Canada, 2…

Words 592 - Pages 3

Essay on Economics note

Class note: In economics, there are always uncertainties involved. These uncertainties include: Cost Price Demand Quality Return/revenue Uncertainty = risk How do you reduce risk? How can you reduce the income uncertainty or risk? Imposing minimum wage. Job protection. How can you reduce the uncertainty about quality? Imposing certainty standard. Getting more information on the product Warranty What if you are trading internationally, what is the risk you face? Exchange rate – depending…

Words 774 - Pages 4

Notes On Economic Data

2.3 Economic Data Index Numbers Used to compare changes in some variable rela7ve to some base period. Value of index in = given period absolute value in given period absolute value in base period X 100 Copyright © 2014 Pearson Canada Inc. Chapter 2, Slide 1 Fig. 2-­‐2 Index Values…

Words 526 - Pages 3

Notes On Sports Economics

36-340, ECONOMICS of Sports SYLLABUS FOR Spring 2015 INSTRUCTOR: Lee J. Van Scyoc OFFICE: CF 324 OFFICE PHONE: 424-7153 OFFICE HOURS: 11:30-12:30 MWF and by appoint­ment REQUIRED: Sports Economics by Roger D. Blair Course objective: Many students follow professional and intercollegiate athletics, but are unaware of the role that economics plays in the games they watch. In this class, students will apply basic microeconomic principles to the world of professional and intercollegiate sports…

Words 358 - Pages 2

Notes On Industrial Economics

IEOR E4003 Industrial Economics Professor Soulaymane Kachani Class Exercise 1: Find the effective interest rate per quarter at a nominal rate of 18% compounded a- Quarterly b- Monthly c- Continuously Class Exercise 2: Suppose we are in the market for a medium-sized used car. We have surveyed the dealers’ advertisements in the newspaper and have found a car that should fulfill our needs. The asking price for the car is $7,500, and the dealer proposes that we make a $500 down payment now…

Words 470 - Pages 2