08/28
what does gdp tell us
- gross domestic product
Function
a function f, is a rule that provides a unique output value(dependent cariable) for any given sets
of inputs (independent variable)
- function of one variable= f(x)= xd to the third -2x +5
- multivaruate function= xy- y squared +2t
examples of functions used in everyday life= converting Celsius to Fahrenheit, calculatin the
amount of change for a customer, determining what’s time to wake up in the morning
- in economics functions help formalizes and similpify complex rules for example
- 1) utility function- each person has a different one- measured how much welfare
(happiness, benefit, enjoyment) an individual gains for a given set of inputs(physical
grids, experience, relationships)
- 2) demand function- how much of something (quantity) a person/ population/ market
would buy at any given price (telling us the price of something got any quantity demand
- The Taylor rule= captures the trade off central banks face between inflation and
unemployment.
The quantity demands of coffees in nyc is equal to one over the price of cofffee
1) what is the function that represents the awaits frmsnded for cappachinos Q, is for given
price, P. Q= 1/P. P= the price when price goes down quantity goes up
scarcity
scarcity in factors if production )resources inputs used to produce goods and services
1) labor- skills and abilities of allo humans at work
2) capital= final goods produced for use in further production
3) land- all natural resources
4) entrepreneurship= assembling of resources to produce new or improved products,
technologies
Trade offs + opportunity cost
limited resources means that choices and trade offfs need to be made
- the field of economics helps us grams and analyze these choices
- two sides of a trade off right and left. The left aide is the benefits and the right side is the
cost. Ex- cost= the time spent and benefits= knowledge
- the trade off can be seen as the cost
- opportunity cost= yhe goods or services that you most forgo to obtain or achieve
something
- three oppurtunity costs are associated with every decision
examples
,Example,e of opportunity costs= someeone takes that train instead of driving. drivting cost $10
and take 30 min while train is $5 and takes a hour= so oppurtunity cost would be the 30 min and
the benefit would be the $5
example 2= Biden invests 450 bullion directly into semiconductor research research and
manufacturing in the US. The oppurtunity cost is
production possibilities frontier
production pissiubulity model illustrates the economic concepts of scarcity, trade offs, a
oppurtunity costs
producton possibities: the combinations of final goods and services that couldd be produced in a
given time period with all available resources and technology
Ex- if u invest 10 hours into micro and macro. If u invest all hours into macro u get an A but in
micro u get a F. Same for the other way around. But if us plot the 10 hours and give 5 and 5 u
will get a B+ in both
Gov intervention
if markets are working properly then markets are good at deciding what to produce, how to
produce, and for who, to produce it for. Gov plats a big role in all countries around the world
1) maintains overall balance n the economy (ex- fighting inflation and supporting growth
when needed)
2) acts when the markets outcomes suboptimal (ex- market failure)
3) provides some good and services (ex- public goods) and regulates production for safety
09/04
Lecture 2- specialization
what is production possibility
people around the globe coordinate production activities to seek to consumers what they want
they global production is a natural outcome of people everywhere acting in thrift one drop
interest to improve their own lives “invisible hand”
- one way to understand for this is yhe simple production possibility model for a particular
country
- there will be two groups producers and consumers and two groups are being produced-
each producer has their own production technology- technology can be proprietary
(when any listing we don’t consider technology)
- model analyzes how much of each good is produced
Production possibility frontier
a country production capabilities can be modeled using the production possibility frontier PPF
Each point correlates with the chart
meaning so at point A they produce 4
million bushels of wheat and 0 shirts but E
,they can produce 0 wheat and 2 million shirts
- the line or curve that shows all possible combinations of two outputs that can be
produced using all available resources
- opportunity cost- they trade off between producing more of one good and less of another
-
Since the U is above the line to is unattainable but T is
opportunity cost of 1 shirt is 2 bushels of wheat
- shirt,wheat—- (0,4) and (2,0) so you solve using slope so -4/2= 2
- of want to produce more you times the slope by how many more
Q- what us the oppurtunity cost of producing 1 million bushel of wheat
A- use shirt over wheat so would be 2/4 so ½ million shirts would be given up to reproduce more
wheat
1) 3 divided by 4 so shirts divided by wheat- what you are asking for will always be the
second number
2) -4 divided by 3
- the oppurtunity cosgt of producing shirts is equal to the slope of PPF
the oppurtunity cost of one shirt is -4/3 bushels of wheat
the oppurtunity cost of wheat is the reciprocal if the oppurtunity cost of shirts
the opportunity cost cost of 1 bushel of wheat (-4/3) so would be -¾
- the previous PPfs assumed that all inputs are able to be transferred betweeproduction
processes at constant rate
- It is likely that some inputs are better suited for making shirts, while other inputs
are better suited for farming.
- This means that the opportunity cost of producing a shirt increases as an
economy produces more shirts. The same is true for wheat.
the slope of the PPF represents the suitability if thr next input that is transferred from one
pridction process to another
, the absolute value of the slope is sometimes called the marginal rate of transformation
- a change in the PPF comes about when there is a change in resources
- An increase in available resources shifts the entire frontier outward
- An improvement in technology for one good rotates the frontier outward
Absolute vs comparative advantage
- suppose than an American worker can produce 50 shirts or 200 bushels of wheat per
day. A German worker can only produce 25 shirts or 50 bushels of wheat
- The US has an absolute advtage in shirt production since a US worker van produce
more shirts than a German worker
- The US has an absolute advantage in wheat production since a US worker can
produced more wheat than a German worker
- Should the US produce export wheat and shirts to Germany?- Germany has a
comparative advantage
- a country has a comparative advantage in a good if it can produce it at a lower
opportunity cost than other countries
Does everybody benefit from this trade
- trade can bring big gains to economics but that doesn’t mean that everyone wins
- specialization does cause gains to trade for all who engage in trade
- People can lose their jobs since they are getting resources from outside sources. Gov
programs help workers cope with job losses but they require that workers skills be
transferable
09/09/24
Gains from trade depend on- comparative advantage- ciubtry can produce same product at
lower opportunity cost (on quiz)
Q- what is a good?
A- product, service
Q- what is a market and why do markets exist
A- one seller and one buyer and a price
Q- why do markets exist
A- people want to trade goods
Q- what is a fell functioning makret?
A- there is a seller and he wants to sell the good and he can then sell it at the market price and
find a buyer. Same fo buyer wants to purchase good or serif and when finding a market they can
purchase at a market price
Q- is it always a good idea to use the market subsystem to decide how to alllocate a good scare
good
A- good idea because the price can be decided by the market
Specialization
we are driven to buy and sell good and services because
what does gdp tell us
- gross domestic product
Function
a function f, is a rule that provides a unique output value(dependent cariable) for any given sets
of inputs (independent variable)
- function of one variable= f(x)= xd to the third -2x +5
- multivaruate function= xy- y squared +2t
examples of functions used in everyday life= converting Celsius to Fahrenheit, calculatin the
amount of change for a customer, determining what’s time to wake up in the morning
- in economics functions help formalizes and similpify complex rules for example
- 1) utility function- each person has a different one- measured how much welfare
(happiness, benefit, enjoyment) an individual gains for a given set of inputs(physical
grids, experience, relationships)
- 2) demand function- how much of something (quantity) a person/ population/ market
would buy at any given price (telling us the price of something got any quantity demand
- The Taylor rule= captures the trade off central banks face between inflation and
unemployment.
The quantity demands of coffees in nyc is equal to one over the price of cofffee
1) what is the function that represents the awaits frmsnded for cappachinos Q, is for given
price, P. Q= 1/P. P= the price when price goes down quantity goes up
scarcity
scarcity in factors if production )resources inputs used to produce goods and services
1) labor- skills and abilities of allo humans at work
2) capital= final goods produced for use in further production
3) land- all natural resources
4) entrepreneurship= assembling of resources to produce new or improved products,
technologies
Trade offs + opportunity cost
limited resources means that choices and trade offfs need to be made
- the field of economics helps us grams and analyze these choices
- two sides of a trade off right and left. The left aide is the benefits and the right side is the
cost. Ex- cost= the time spent and benefits= knowledge
- the trade off can be seen as the cost
- opportunity cost= yhe goods or services that you most forgo to obtain or achieve
something
- three oppurtunity costs are associated with every decision
examples
,Example,e of opportunity costs= someeone takes that train instead of driving. drivting cost $10
and take 30 min while train is $5 and takes a hour= so oppurtunity cost would be the 30 min and
the benefit would be the $5
example 2= Biden invests 450 bullion directly into semiconductor research research and
manufacturing in the US. The oppurtunity cost is
production possibilities frontier
production pissiubulity model illustrates the economic concepts of scarcity, trade offs, a
oppurtunity costs
producton possibities: the combinations of final goods and services that couldd be produced in a
given time period with all available resources and technology
Ex- if u invest 10 hours into micro and macro. If u invest all hours into macro u get an A but in
micro u get a F. Same for the other way around. But if us plot the 10 hours and give 5 and 5 u
will get a B+ in both
Gov intervention
if markets are working properly then markets are good at deciding what to produce, how to
produce, and for who, to produce it for. Gov plats a big role in all countries around the world
1) maintains overall balance n the economy (ex- fighting inflation and supporting growth
when needed)
2) acts when the markets outcomes suboptimal (ex- market failure)
3) provides some good and services (ex- public goods) and regulates production for safety
09/04
Lecture 2- specialization
what is production possibility
people around the globe coordinate production activities to seek to consumers what they want
they global production is a natural outcome of people everywhere acting in thrift one drop
interest to improve their own lives “invisible hand”
- one way to understand for this is yhe simple production possibility model for a particular
country
- there will be two groups producers and consumers and two groups are being produced-
each producer has their own production technology- technology can be proprietary
(when any listing we don’t consider technology)
- model analyzes how much of each good is produced
Production possibility frontier
a country production capabilities can be modeled using the production possibility frontier PPF
Each point correlates with the chart
meaning so at point A they produce 4
million bushels of wheat and 0 shirts but E
,they can produce 0 wheat and 2 million shirts
- the line or curve that shows all possible combinations of two outputs that can be
produced using all available resources
- opportunity cost- they trade off between producing more of one good and less of another
-
Since the U is above the line to is unattainable but T is
opportunity cost of 1 shirt is 2 bushels of wheat
- shirt,wheat—- (0,4) and (2,0) so you solve using slope so -4/2= 2
- of want to produce more you times the slope by how many more
Q- what us the oppurtunity cost of producing 1 million bushel of wheat
A- use shirt over wheat so would be 2/4 so ½ million shirts would be given up to reproduce more
wheat
1) 3 divided by 4 so shirts divided by wheat- what you are asking for will always be the
second number
2) -4 divided by 3
- the oppurtunity cosgt of producing shirts is equal to the slope of PPF
the oppurtunity cost of one shirt is -4/3 bushels of wheat
the oppurtunity cost of wheat is the reciprocal if the oppurtunity cost of shirts
the opportunity cost cost of 1 bushel of wheat (-4/3) so would be -¾
- the previous PPfs assumed that all inputs are able to be transferred betweeproduction
processes at constant rate
- It is likely that some inputs are better suited for making shirts, while other inputs
are better suited for farming.
- This means that the opportunity cost of producing a shirt increases as an
economy produces more shirts. The same is true for wheat.
the slope of the PPF represents the suitability if thr next input that is transferred from one
pridction process to another
, the absolute value of the slope is sometimes called the marginal rate of transformation
- a change in the PPF comes about when there is a change in resources
- An increase in available resources shifts the entire frontier outward
- An improvement in technology for one good rotates the frontier outward
Absolute vs comparative advantage
- suppose than an American worker can produce 50 shirts or 200 bushels of wheat per
day. A German worker can only produce 25 shirts or 50 bushels of wheat
- The US has an absolute advtage in shirt production since a US worker van produce
more shirts than a German worker
- The US has an absolute advantage in wheat production since a US worker can
produced more wheat than a German worker
- Should the US produce export wheat and shirts to Germany?- Germany has a
comparative advantage
- a country has a comparative advantage in a good if it can produce it at a lower
opportunity cost than other countries
Does everybody benefit from this trade
- trade can bring big gains to economics but that doesn’t mean that everyone wins
- specialization does cause gains to trade for all who engage in trade
- People can lose their jobs since they are getting resources from outside sources. Gov
programs help workers cope with job losses but they require that workers skills be
transferable
09/09/24
Gains from trade depend on- comparative advantage- ciubtry can produce same product at
lower opportunity cost (on quiz)
Q- what is a good?
A- product, service
Q- what is a market and why do markets exist
A- one seller and one buyer and a price
Q- why do markets exist
A- people want to trade goods
Q- what is a fell functioning makret?
A- there is a seller and he wants to sell the good and he can then sell it at the market price and
find a buyer. Same fo buyer wants to purchase good or serif and when finding a market they can
purchase at a market price
Q- is it always a good idea to use the market subsystem to decide how to alllocate a good scare
good
A- good idea because the price can be decided by the market
Specialization
we are driven to buy and sell good and services because
