Econ 201 Notes

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Economics 201 notes Chapter 1 : First Principles • Economics is science of decision making • individual choice is the basis of economics • methodology = cost-benefit analysis • If it does not involve choice, it isn 't economics. • Resources (something used to produce something else) include capital like tools and equipment, land like natural resources and labor • Resources are scarce • Opportunity cost are all costs that you must give up to get it. • trade-off is the comparison between the costs and benefits of doing something • decision of this type is called marginal decision • study of them called marginal analysis • An economy is efficient if all opportunities to make some people better off without…show more content…
2) S or D? 3) effect on EQ Price and Quantity notes: There will be 30 points out of the 150 points for those questions in the final exam. Chapter 5: The market strike back (Market Manipulation) -market out of EQ -Who? ➢ producers → collusion (producer work together to manipulate the market) ➢ consumers - boycotts ➢ governments - price control Price support (floor) -where govt. sets a price > Peq (legal minimum price) -rationale: to help producers stay in business (make a living) P (floor) > Peq → Qs > Qd (surplus) Govt. solutions for surplus 1) S↓- govt. pays farmer not to produce 2) D↑- govt. buys some of the surplus e.g. agric. price support and minimum wage law Price ceiling -where govt. sets a price < Peq -rationale: to make price↓so consumer could afford it P (ceiling) < Peq → Qd > Qs (shortage) Govt. solutions for shortage 1) S↑ 2) D↓ - rationing program → "black market" e.g. rent control and price controls in planned/command economies Burma - autarky - closed economy Chapter 17: Externalities - costs or benefits when goods or service is produced or consumed that "spillover" to third parties, e.g. ext. costs - pollution health costs, insurance, property damage Social costs = private costs + externality costs Market does not accurately reflect social costs, therefore, market fail.

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