Intro to Macro Notes

A attitude In which unlimited wants exceed the Ilmlted resources getable to gather those wants scotchs The study of the choices people make to polish off their goals, clearn their strange resources. Economic Model A simplified version of reality utilise to crush real-world scotch situations.Often based on unrealistic assumptions that change the problem at hand without substanti each(prenominal)y change the validity of the answer No one stupefy can address either important topic, so we will learn diff models as we study difftopics Economic analysis may be positive or normative Positive analysis Analysis interested with what is Positive statements can be evaluated as reliable or false using only data. For event, after speeding cameras were Installed on 1-38, the average speed of motorists declivity reased. Normative analysis Analysis concerned with what ought to be.Normative statemnts contend personal values, so they cannot be evaluated as admittedly or flase using only data the g everywherenemtn should lay in addition speeding cameras on 1-380 Economics is study on two levels Micro economicals The study of how households and firms make choices, how they nteract in markets, and how the government attempts to influence their choices. Macroeconomics The study ot the economic system as a whole including topics such as Inflation, unemployment, and economic growth. Micro and macro ar closely Interwlned because changes In the overall economy arise from the decisions of individual households and firms.CHAPTER 2 Trade off The idea hat because of scarcity, producing much of one solid or gain mode producing less of another good or process PPH A curve snowlng tne maxlmum attalnaDle comDlnatlons 0T two products tn ay be reard with functional resources and underway technology The PPF is an economic model used to analyze the tradeoffs that individuals firms, and countries face when deciding how to employ their scarce resources. Combinations out side the PPF are unattainable, given over the available resources and underway technology (scarcity) Combinations inside or on the PPF are attainable, given current shit.Inside the PPF is ineffificent, reosuces are not cosmos used and realistic for economy to produce more than of one without making more of other Comibinations of the PPF are efficient because the maximum output obtained from he available resouces are current technology so it is insurmountable for the economy to produce more of one good without producing less of the other(Trade ofO Oportunity appeal The highest-valued alternative that must be given up to engage in an performance Every choice has an fortune toll because every choice has a next-best alternative In our pPF example near can use all is avaible resources and current technology to produce either 200 laptops per workweek or 400 anovulants per week 200L=400T so 1 L=2T and IT=O. L salutarys Marginal opportunity woo of 1 laptop is ceaseless at 2 birth control pills, meaning that for Near to produce 1 more laptop, it must give up producing 2 tablets inversely, Nears bare(a) opportunity cost of 1 tablet is constant at one-half of a laptop, meaning that for Near to produce 1 more tablet, it must give up producing one-half of a laptop In the same example, Far can use all resources and currnet technology to produce either 220 laptops per week or 1100 tablets per week 220L=1100T, so IL-5T and IT=. 2L Fars bare(a) opportunity cost of 1 laptop is constant at 5 tablets, and Fars marginal opportunity cost of 1 tablet is constant at fifth part ofa laptopA bowed-out PPF illustrates increasing marginal opportunity costs as the economy increases it outturn of one good in one-unit increments, it must lessen tis exertion of the other good by bigger and larger amounts (see page 44 of the textbook for a numerical example) I nls occurs Decause some resources are netter sultea to produce one g ratner than the other A bowed-out PPF is more realistic than a straight-line PPF but we use straight-line PPFs for chasteness (the conclusions are the same for both) At any given time, the resources available to an economy are fixed, but over time, the esources available to an economy may increase or decrease. When an economy gains resources, its PPF shirts superficial, and when an economy loses resources , its PPF shifts inward An improvement in technology makes it possible for an economy to produce more goods and services with the same amount of resources, so the economys PPF shifts outward when technology improves. Economic Growth The ability of the economy to increase the production of goods and services. Outward shifts of an economys PPF represent economic growth EXAMPLES illustrate the effect of each of the avocation on a bowed-out PPF for corn and computersComparative benefit The ability of an individual, a firm or clownish to produce a good or service at a lower opportunity cost than competitors Near has the c ompartative usefulness in the production of laptops Fars marginical opportunity cost of 1 laptop is 5 tablets, slice nears marginial oppurnity cost of 1 laptop is only 2 tablets. Far has the comparative degree degree advantage in the production of tablets. Nears marginal opportunity cost of 1 tablet is one-half of a laptop, while fars marginal opportunity cost of 1 tablet is only one-fifth ofa laptop. It is possitble o have the absolute advantage without having comparative advantage n production of that good (far and laptops) It is possible to have comparative advantage without having absolute advantage too. near and laptops) Gains from trade arise form distinction and trade are based on comparative advantage.