ECN 201 NOTES - CH.1 & 2
IMPORTANT VOCAB/TOPICS
Nominal GDP Real GDP PPP Growth Rate Technology
Industrial Population Environmental
Production Institutions
Revolution Growth Consequences
Capitalism Private Property Capital Goods Markets Firms
Opportunity Absolute Comparative
Specialization Trade
Cost Advantage Advantage
Natural Economic Political Essential Goods Political
Experiment Conditions Conditions and Services Systems
Dynamic
Democracy Equilibrium Ceteris Paribus Incentives
[System]
Schumpeterian
Relative Prices Economic Rent Relative Prices Entrepreneur
Rent
Entrepreneurial Creative
Firm Destruction
, 2
Chapter 01
Nominal GDP (Gross Domestic Product) =
($x)*(#x)+($y)*(#y)+ … +($)*(quantity/# for all other goods/services)
NGDP = add all i (items)
➢ Nominal GDP fluctuates because quantities or prices change
○ To figure out prices, we use a base year
➢ PPP (Purchasing Power Parity) prices adjust for different countries
Real GDP per capita provides the most accurate results
Growth Rate → gr(x)= x t-xt-1/xt-1
$51,580 in the 2nd quarter of 2016
$52,296 in the 2nd quarter if 2017
gr(x) = 52,296-51,580/51,580 = 716/51,580 = 0.01388 = 1.4%
Technology is a process that uses inputs to produce an output
➢ Reducing the amount of work-time it takes to produce the things we need allows significant
increases in living standards
➢ Remarkable scientific and technological advances occurred more or less at the same time (mid
18th-century Britain)
Industrial Revolution is a wave of technological advances starting in mid 18th century Britain, which
transformed an agrarian and craft-based economy into a commercial and industrial economy
The economy is just one piece of human society
➢ Humanity lives in the biosphere, representing all living things
○ As the economy has increased, so has CO2 emissions [note: if multiple lines on one graph
increase, question why?]
Increased production and population growth affects the environment
➢ Global impacts → climate change
➢ Local impacts → pollution in cities, deforestation
○ Technology may provide the solution
Environmental consequences are the results of both:
➢ The expansion of the economy
➢ The way the economy is organized
Institutions are the laws and social customs governing the production and distribution of goods and
services
Capitalism is an economic system in which the main institutions are private property, markets, and firms
➢ Profit-based, belonging to the “owners”
Private property is ownership over possessions
➢ Includes capital goods (the non-labor inputs used in production)
➢ Does not include things like air or knowledge, etc.
IMPORTANT VOCAB/TOPICS
Nominal GDP Real GDP PPP Growth Rate Technology
Industrial Population Environmental
Production Institutions
Revolution Growth Consequences
Capitalism Private Property Capital Goods Markets Firms
Opportunity Absolute Comparative
Specialization Trade
Cost Advantage Advantage
Natural Economic Political Essential Goods Political
Experiment Conditions Conditions and Services Systems
Dynamic
Democracy Equilibrium Ceteris Paribus Incentives
[System]
Schumpeterian
Relative Prices Economic Rent Relative Prices Entrepreneur
Rent
Entrepreneurial Creative
Firm Destruction
, 2
Chapter 01
Nominal GDP (Gross Domestic Product) =
($x)*(#x)+($y)*(#y)+ … +($)*(quantity/# for all other goods/services)
NGDP = add all i (items)
➢ Nominal GDP fluctuates because quantities or prices change
○ To figure out prices, we use a base year
➢ PPP (Purchasing Power Parity) prices adjust for different countries
Real GDP per capita provides the most accurate results
Growth Rate → gr(x)= x t-xt-1/xt-1
$51,580 in the 2nd quarter of 2016
$52,296 in the 2nd quarter if 2017
gr(x) = 52,296-51,580/51,580 = 716/51,580 = 0.01388 = 1.4%
Technology is a process that uses inputs to produce an output
➢ Reducing the amount of work-time it takes to produce the things we need allows significant
increases in living standards
➢ Remarkable scientific and technological advances occurred more or less at the same time (mid
18th-century Britain)
Industrial Revolution is a wave of technological advances starting in mid 18th century Britain, which
transformed an agrarian and craft-based economy into a commercial and industrial economy
The economy is just one piece of human society
➢ Humanity lives in the biosphere, representing all living things
○ As the economy has increased, so has CO2 emissions [note: if multiple lines on one graph
increase, question why?]
Increased production and population growth affects the environment
➢ Global impacts → climate change
➢ Local impacts → pollution in cities, deforestation
○ Technology may provide the solution
Environmental consequences are the results of both:
➢ The expansion of the economy
➢ The way the economy is organized
Institutions are the laws and social customs governing the production and distribution of goods and
services
Capitalism is an economic system in which the main institutions are private property, markets, and firms
➢ Profit-based, belonging to the “owners”
Private property is ownership over possessions
➢ Includes capital goods (the non-labor inputs used in production)
➢ Does not include things like air or knowledge, etc.
