AVMG 4200 - SA EXAM 1 QUESTIONS
1SA1. List and describe the three main forms of utility or value in a modern
industrialized economic system. How is each created? - Answers :- The three main
forms of utility or value in a modern industrialized economic system are possession,
form, and time and place. Possession is created through marketing, form is created
through manufacturing, and time and place is created through transportation logistics.
Possession is the value to each individual consumer. For example, I do not use makeup
so a company who makes makeup would have to apparent value to me but if they
market to a woman who uses makeup every morning there is much more possession
value to that person. Form value is created through manufacturing so for example I
would not be willing to pay anything for all the parts to a new car unassembled because
I don't know how to build the car so it would be a waste of my money in that form, but
the value increases significantly if through manufacturing they use all those same parts
to put the car into a drivable and useable form. Lastly, time and place is important
because value can increase significantly by having a product in the right place at the
right time and by moving products from areas of surplus to areas of shortage. For
example, if you sell water in Auburn on any given day it won't be worth that much
because there is plenty of water at any store or restaurant or from our faucets. Take that
same fresh water out to a dessert in the middle of the summer where the temperatures
are blisteringly hot and people have no supply of water and the value of your water has
increased significantly.
1SA2. Under modern free market economic theory, list and describe the conditions or
circumstances that lead to the "invisible hand" phenomena. What macroeconomic effect
does the "invisible hand" have on the quality of life for members of the economic
system? - Answers :- There are three conditions that lead to the "invisible hand:
phenomena. First, the value proposition has to be satisfied which means that the
change in value has to be greater than the change in cost. Second, market conditions
must exist meaning there has to be a way for the exchange of goods to happen (ex.
currency), a legal system to enforce contracts, and the buyer and seller must know of
each other. Third, the government can't interfere with the movement of such goods. This
invisible hand has the macroeconomic effect of bettering the lives of for the members of
the economic system by moving goods from areas of surplus to areas of shortage.
1SA3. List and describe the macroeconomic factors that led to the explosion in
international trade at the end of World War II. Give examples of each today. - Answers
:- The three main economic factors that led to the explosion in international trade at the
end of WWII were cheap, ubiquitous, easy transportation, ease of information
accessibility, and governments facilitating trade rather than stopping it. Easy and cheap
transportation has allowed the cheaper production of goods in countries such as China
to then be shipped to the United States. The ease of information such as on a phone
has allowed more global and connected supply and demand markets. Lastly, things like
the World Trade Organization help facilitate trade today.
1SA1. List and describe the three main forms of utility or value in a modern
industrialized economic system. How is each created? - Answers :- The three main
forms of utility or value in a modern industrialized economic system are possession,
form, and time and place. Possession is created through marketing, form is created
through manufacturing, and time and place is created through transportation logistics.
Possession is the value to each individual consumer. For example, I do not use makeup
so a company who makes makeup would have to apparent value to me but if they
market to a woman who uses makeup every morning there is much more possession
value to that person. Form value is created through manufacturing so for example I
would not be willing to pay anything for all the parts to a new car unassembled because
I don't know how to build the car so it would be a waste of my money in that form, but
the value increases significantly if through manufacturing they use all those same parts
to put the car into a drivable and useable form. Lastly, time and place is important
because value can increase significantly by having a product in the right place at the
right time and by moving products from areas of surplus to areas of shortage. For
example, if you sell water in Auburn on any given day it won't be worth that much
because there is plenty of water at any store or restaurant or from our faucets. Take that
same fresh water out to a dessert in the middle of the summer where the temperatures
are blisteringly hot and people have no supply of water and the value of your water has
increased significantly.
1SA2. Under modern free market economic theory, list and describe the conditions or
circumstances that lead to the "invisible hand" phenomena. What macroeconomic effect
does the "invisible hand" have on the quality of life for members of the economic
system? - Answers :- There are three conditions that lead to the "invisible hand:
phenomena. First, the value proposition has to be satisfied which means that the
change in value has to be greater than the change in cost. Second, market conditions
must exist meaning there has to be a way for the exchange of goods to happen (ex.
currency), a legal system to enforce contracts, and the buyer and seller must know of
each other. Third, the government can't interfere with the movement of such goods. This
invisible hand has the macroeconomic effect of bettering the lives of for the members of
the economic system by moving goods from areas of surplus to areas of shortage.
1SA3. List and describe the macroeconomic factors that led to the explosion in
international trade at the end of World War II. Give examples of each today. - Answers
:- The three main economic factors that led to the explosion in international trade at the
end of WWII were cheap, ubiquitous, easy transportation, ease of information
accessibility, and governments facilitating trade rather than stopping it. Easy and cheap
transportation has allowed the cheaper production of goods in countries such as China
to then be shipped to the United States. The ease of information such as on a phone
has allowed more global and connected supply and demand markets. Lastly, things like
the World Trade Organization help facilitate trade today.
