Ch1: Positive economics: An economic statement that is based on upon facts or a theory Ex: 1st Wk of every month in the government make a
report (Unemployment rate: 3.8% Skills set that’s why there are so many jobs available)
Normative economics: An economic statement that is based upon opinion (Subjective) You tell your own opinion and turn it into your own facts
Resources: Full employment and full production, Resources are fixed, Technology is fixed, Consumer goods and Capital goods
Pizza and Robot (table and graph in the textbook) full employment & full production
A maximum level of output (Countries potential GDP (gross domestic products))
Formula: productive efficiency = full employment + full production
Point U (the professor own point for the graph) Productive inefficiency: Unemployment, Underemployment
Formula: inefficiency = actual GDP - potential GDP = GDP GAP
Factors of Economic Growth: An increase in the quantity of resources (Improvements in the quantity of resources, Improved technology)
Present choices VS future possibilities: Investing in your education, what do you hope to get out of it? High paying jobs, Better outcomes in the
future
Saving money: Seniors some don’t save money for retirement, some kids don’t save money (millennial cousins)
Savings -----> Investment -------> Economic growth
Ch2: What is the economic system? A particular set of institutional arrangement and a coordinating mechanism that addresses the economizing
problem (Economizing = limited resources VS unlimited wants)
Institution and Competition?
Pure command system (Socialism): No countries, Cuba, Venezuela, North Korea, Zimbabwe, USSR, China, Russia
Pure capitalism (market system): No countries, Switzerland, Australia, USA (Depending on who’s in office we go back and forth with
socialism and the market system (USA))
Characteristics of pure capitalism (powers the individual):
Private property, Reliance on the market system (economic freedom), Prices are the function of the market, Role of self-interest
(Invisible hand)
Competition: the market ‘s going against other market’s (“Competition advantage”; having lower prices than the other markets),
Differentiation; products is different and stands out from the other competitors
All countries are in a blend of socialism and capitalism
Karl Marx (communism and socialism) 1848, Virtues of communism & Adam Smith (capitalism) 1776
Investment in human capital:
Education: Reward - higher job, degree, double pay with 4 years of college than high school House
Characteristics of socialism (pure command system): Government ownership of property resources, NO COMPETITION, Prices are
determined by the government
5 Fundamental economic questions:
What goods and services should the economy produce? (command system)
The government, Central economic planning board (Power at the top), Buyer (consumer) (capitalism)
How should the goods and services be produced? (command system) The government, Central economic planning board, Business
(capitalism)
Who gets the goods and services? (command system) Income (Capitalism)
How does the economy system promote innovation (technology)? (command system) - Slow Fast (capitalism)
How does the economy accommodate change? (command system) - Slow Fast (capitalism)
Coordination and incentive problems in a command system:
Incentive problems: Government monopoly of industry, no incentive & No efficiency, no measured of profitability
Disincentive Rather does not exceed their goals/targets
Coordination problems: Central planning committee The industry doesn’t meet its quotas (Effect all industries)
The Circular Flow Model - Pure Capitalism
Ch3: What is the Market? A coordinating mechanism by which buyers (demand) interact with sellers (supply) and where an exchange of
goods, services or resources occurs for a specific price
Local, regional, national or international markets (based on geography)
Law of supply: Firms (sellers) will produce and offer for sale more of a product at a higher price than at a lower price other factors help
constantly
Higher price = more profit (If the price goes up (independent) a greater quantity will go up (dependent))
If the price goes down a greater quantity will go down
Graph: Represents all the buyers and sellers (Independent (price), Quantity (dependent))
Law of demand: Buyers will purchase more of a good at a lower price than at a higher price other factors constant. Inverse
A change in the price of related goods
Substitute Goods: If the price of shell gas went up (substitute) - Demand for mobile gas would go up, If the price of shell gas went down
(substitute), Demand for mobile gas would go down
Complementary Goods: (Goods that go together)
relationship: Between price and quantity demanded
The factors of Demand: A change in buyer taste or preferences, A favorable change in taste or preference (increase in demand) (advertising) Ex:
dietary supplements (fish oil), organic based food products, sushi, cars (SUVs, cross over) the decrease in demand for sedans, and vaping
An unfavorable change in taste or preference (decrease in demand) Ex: cigarettes
Price expectations: Goes up or down in the near future Ex: Buying a house, Stocks
Price of real estate will go up (near future) Demand will go up (present) / BUBBLE (prices shoot up really fast) Buying it at a low price,
flipping it you earn more money
Price of real estate will go down (near future), Demand will go down (present)
Price Floor: “price support” the government establishes a minimum price for a product which is above the current equilibrium or market price
(price is too LOW) Example: Milk, Wheat, and corn Surplus (government buys) Higher price, higher taxes
Price Ceiling: the government establishes a maximum price for a product which is below the current equilibrium or market price (Price is too
HIGH) Example: Gasoline Product Shortage Rationing program (gas lines)
Rental dwelling units (Cities - more affordable) Boston
report (Unemployment rate: 3.8% Skills set that’s why there are so many jobs available)
Normative economics: An economic statement that is based upon opinion (Subjective) You tell your own opinion and turn it into your own facts
Resources: Full employment and full production, Resources are fixed, Technology is fixed, Consumer goods and Capital goods
Pizza and Robot (table and graph in the textbook) full employment & full production
A maximum level of output (Countries potential GDP (gross domestic products))
Formula: productive efficiency = full employment + full production
Point U (the professor own point for the graph) Productive inefficiency: Unemployment, Underemployment
Formula: inefficiency = actual GDP - potential GDP = GDP GAP
Factors of Economic Growth: An increase in the quantity of resources (Improvements in the quantity of resources, Improved technology)
Present choices VS future possibilities: Investing in your education, what do you hope to get out of it? High paying jobs, Better outcomes in the
future
Saving money: Seniors some don’t save money for retirement, some kids don’t save money (millennial cousins)
Savings -----> Investment -------> Economic growth
Ch2: What is the economic system? A particular set of institutional arrangement and a coordinating mechanism that addresses the economizing
problem (Economizing = limited resources VS unlimited wants)
Institution and Competition?
Pure command system (Socialism): No countries, Cuba, Venezuela, North Korea, Zimbabwe, USSR, China, Russia
Pure capitalism (market system): No countries, Switzerland, Australia, USA (Depending on who’s in office we go back and forth with
socialism and the market system (USA))
Characteristics of pure capitalism (powers the individual):
Private property, Reliance on the market system (economic freedom), Prices are the function of the market, Role of self-interest
(Invisible hand)
Competition: the market ‘s going against other market’s (“Competition advantage”; having lower prices than the other markets),
Differentiation; products is different and stands out from the other competitors
All countries are in a blend of socialism and capitalism
Karl Marx (communism and socialism) 1848, Virtues of communism & Adam Smith (capitalism) 1776
Investment in human capital:
Education: Reward - higher job, degree, double pay with 4 years of college than high school House
Characteristics of socialism (pure command system): Government ownership of property resources, NO COMPETITION, Prices are
determined by the government
5 Fundamental economic questions:
What goods and services should the economy produce? (command system)
The government, Central economic planning board (Power at the top), Buyer (consumer) (capitalism)
How should the goods and services be produced? (command system) The government, Central economic planning board, Business
(capitalism)
Who gets the goods and services? (command system) Income (Capitalism)
How does the economy system promote innovation (technology)? (command system) - Slow Fast (capitalism)
How does the economy accommodate change? (command system) - Slow Fast (capitalism)
Coordination and incentive problems in a command system:
Incentive problems: Government monopoly of industry, no incentive & No efficiency, no measured of profitability
Disincentive Rather does not exceed their goals/targets
Coordination problems: Central planning committee The industry doesn’t meet its quotas (Effect all industries)
The Circular Flow Model - Pure Capitalism
Ch3: What is the Market? A coordinating mechanism by which buyers (demand) interact with sellers (supply) and where an exchange of
goods, services or resources occurs for a specific price
Local, regional, national or international markets (based on geography)
Law of supply: Firms (sellers) will produce and offer for sale more of a product at a higher price than at a lower price other factors help
constantly
Higher price = more profit (If the price goes up (independent) a greater quantity will go up (dependent))
If the price goes down a greater quantity will go down
Graph: Represents all the buyers and sellers (Independent (price), Quantity (dependent))
Law of demand: Buyers will purchase more of a good at a lower price than at a higher price other factors constant. Inverse
A change in the price of related goods
Substitute Goods: If the price of shell gas went up (substitute) - Demand for mobile gas would go up, If the price of shell gas went down
(substitute), Demand for mobile gas would go down
Complementary Goods: (Goods that go together)
relationship: Between price and quantity demanded
The factors of Demand: A change in buyer taste or preferences, A favorable change in taste or preference (increase in demand) (advertising) Ex:
dietary supplements (fish oil), organic based food products, sushi, cars (SUVs, cross over) the decrease in demand for sedans, and vaping
An unfavorable change in taste or preference (decrease in demand) Ex: cigarettes
Price expectations: Goes up or down in the near future Ex: Buying a house, Stocks
Price of real estate will go up (near future) Demand will go up (present) / BUBBLE (prices shoot up really fast) Buying it at a low price,
flipping it you earn more money
Price of real estate will go down (near future), Demand will go down (present)
Price Floor: “price support” the government establishes a minimum price for a product which is above the current equilibrium or market price
(price is too LOW) Example: Milk, Wheat, and corn Surplus (government buys) Higher price, higher taxes
Price Ceiling: the government establishes a maximum price for a product which is below the current equilibrium or market price (Price is too
HIGH) Example: Gasoline Product Shortage Rationing program (gas lines)
Rental dwelling units (Cities - more affordable) Boston
