Notesale: Turn your study into money

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ECON 1040: ​Principles of Macroeconomics
Dr
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II
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Macroeconomics​: the branch of economics that deals with the economy as a whole, typically on a
global level
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The economy is modeled in the study of economics, and simplifying assumptions are made
1
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C
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Positive Analysis of Economics​: focuses on the “what is” or currency of economics, and
is based on facts
2
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D
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What to produce with limited resources;
a) Determined by the ​resources available​ (financial, human, or natural)
2
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And for whom goods and services are produced/who is the consumer who receives them
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Suppose that on an island of 1,000 children, every so often there is a disease that will wipe out
90% of the children
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One dose of it reduces the possibility of death
to 10%; two reduces to 8%; three reduces to 6%; and four reduces to 4%
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There are only 1,000 antidotes available
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In a ​Market Economy​, antidote distribution would be ​determined by the public market​ (i
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in an
auction)
1
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Thus, for families with children living in a lower economic class,
being able to afford and purchase antidotes would be futile, and more children would die
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For ​pharmaceutical companies​, this is the most ideal economy
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3
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Those who had no
children, but were still wealthy could theoretically bid on antidotes and sell them for even
more money when the supply had diminished
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The ​economy​ in this situation would fluctuate; high at first, due to the massive amounts
of money being used to purchase antidotes, but extremely low in the future after the
generation of children grew up, reduced by the disease by a large percent
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C
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For ​families with children​, this is perhaps the more fair economy, because each child will
receive one antidote
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For ​pharmaceutical companies​, this is the less attractive economy, because it means that
they will not earn as much money for the drugs; each antidote will be sold at the same
price
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For ​families without children​, this economy does not matter, as they do not stand to lose
their children and will not receive an antidote at all
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For the ​economy​, this model does not provide any high risk or benefit from a high
antidote demand/pricing, so it’s safe to assume that the economy would stay the same
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A
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Factors of Production​: resource inputs used to produce goods and services
A
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Land​: all natural resources
C
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(i
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Bentley Hall is capital: a building used for academic and teaching output)
2
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3
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D
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Majority of entrepreneurship in the US are corporate, and are therefore called
“Intrapreneurship,” as they operate within a larger company
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Limited resources (scarcity) requires choices and trade-offs to be made
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Economics helps us make these choices, by studying how best to allocate scarce resources among
competing uses
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When we choose to use resources to produce one thing, we must give up producing something else
with those resources; it is a trade-off that comes with a cost
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These costs are associated with every decision
2
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Production Possibilities​: the combinations of final goods and services that could be produced in a given
time period with all available resources and technology
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The ​Production Possibility Curve/Model​ (PPC) illustrates the economic concepts of:
1
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Trade-offs​: to produce more of Product A, we must give up production of Product B
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III
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V
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VII
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5
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IX
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Points ​within the PPC are attainable but not efficient​ (some resources are not used)
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B
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1
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The Mechanisms of Choice
A
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Also called “​the Invisible Hand​” by economist Adam Smith
2
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B
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C
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The market is ​highly efficient in terms of production​,
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e
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e
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Most economies have a mixed market​; few have relied exclusively on either the pure
market mechanism or pure government directive to manage the economy
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Market Failure​: if the market does not produce the mix of goods that society desires
1
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B

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