Micro & Macro Economics

Gross Domestic Product (GDP) - it represents all the goods and services produced annually US GDP approximately - $15 Trillion Microeconomics - decision making by individuals, business firms, and industries Macroeconomics - focuses on the broader issues in the economy such as inflation, unemployment rate Efficiency - deals with how resources are allocated Equity - is about "fairness" ... is it fair that a CEO of a large company makes 100 times more money than her rank and file workers? Opportunity Costs - if we undertake one activity, some other activity must be given up. Ex: - Going to the movies versus going to the gym; going to college versus working People or Corporations follow Incentives: - Individual Retirement Accounts (IRAs - allow you to deduct a certain amount from your income and the money can be invested tax free The interest on your mortgage is tax deductible - The state of Georgia is offering $23m in tax credits and other incentives to move Mercedes-Benz USA's headquarters from New Jersey to suburban Atlanta - Markets are Efficient - - Oil at $148 per barrel encourages new sources of supply (i.e. "fracking") - Oil at $48 per barrel will result in the high cost producers to stop producing Information is important - - Markets tend to be efficient because people tend to make rationale choices. To help make these choices, people rely on information o Price comparisons - Amazon vs. Best Buy Specialization and Trade improve our lives - - Most of the clothing we wear is produced overseas Productivity Determines Our Standard of living - - Computer, Smart Phone, New Surgical techniques (i.e. non evasive surgery) The Government can smooth the fluctuations in the overall economy - - Recent government bailout of the major banks, General Motors, etc. - Unemployment insurance Ceteris paribus - assumption used in economics, where other relevant factors or variables are held constant. Scarcity - Our unlimited wants clash with limited resources, leading to scarcity. Everyone faces scarcity. Economics focuses on the allocation of scarce resources to satisfy unlimited wants Rational thinking requires thinking at the margin. - We live in a consumer world: - - Several centuries ago, individuals produced most of what they consumed. - Today, most of us produce little of what we consume. We work at specialized jobs, and then use our wages to purchase the goods we need. Drivers of Economics Growth: - - Technological Change ( it is everywhere ) - Trade (clothing, consumer electronics)