economics 101
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Economics 101. Prof. Edgren. Economics. How societies use scarce resources to produce valuable commodities and distribute them among people. Question: What's the best way to distribute the goods that are produced in a society?. Macroeconomics. - PowerPoint PPT PresentationTRANSCRIPT
Economics 101Prof. Edgren
Economics
How societies use scarce resources to produce valuable commodities and distribute them among people.
Question: What's the best way to distribute the goods that are produced in a society?
Macroeconomics
Dealing with the decision making of an economy as a whole.
Microeconomics
Dealing with how individual markets behave.
Think LARGE!
Macroeconomics
Which is better?
Command vs. Market Economies
Command Economies
• Centrally controlled by the government
• Central Planners decide what to produce and decides who will produce the goods
Question: What problems can you foresee with this type of economy?
Examples of Command Economies
Think COMMUNISM
• North Korea
• China
• Russia
Market Economies
• Freedom to enter any contract or refuse any contract
• Goods and services flow naturally to where there is need/demand
• Free markets are self-correcting
Trade
ANY two countries will benefit from trade!
This is true even if one country can produce ALL goods more cheaply.
Example
With 1 acre of land, one tractor, and two workers:
The US can produce 100 bushels of wheat or they can produce 30 sheep.
New Zealand can produce 80 bushels of wheat or they can produce 50 sheep.
**The US has an absolute advantage over NZ in wheat. NZ has an absolute advantage in producing wool.
Specializing
Countries focus on what they're good at.
Countries will trade for other goods they cannot produce efficiently
Example - Mutually Advantageous Trade
US - produces wheat NZ - produces wool
US can't produce wool as cheaply as NZ, and it is less costly for them to pay for it than to produce it themselves.
Same goes for NZ and wheat.
Conclusion: both countries come out ahead via trade.
Trade Barriers
• Tariffs
• Quotas
• Subsidies
1970s and the Auto Industry
• Detroit auto workers fought for protection
• Japanese import quota
Two things happened
• Less competition for US-made cars caused prices to rise
• Less supply of Japanese cars caused prices to rise
• LOSE-LOSE situation!
Buy American?
Why you SHOULDN'T Buy American
False reasons to buy American made goods:
• Patriotism
• National Security
• Jobs
Be American and allow Free Trade!
Microeconomics
Dealing with how individual markets behave.
Supply and Demand
Supply - how much goods or services someone is willing to provide at a certain price.
Demand - how much goods or services someone is willing to buy at a certain price.
The Supply Curve
Quantity
Price
The Demand Curve
Quantity
Price
Supply and Demand
Quantity
Price
Supply
Demand
Surplus
Shortage
Equilibrium
Quantity
Price
Supply
Demand
Equilibrium Price
Price Elasticity
Price
Rev
enue
Questions?
Economics 101 AssignmentOption #1
Question: Should we have free trade with our enemies?
• Based on what you have learned today, is it a good idea to have free trade with our enemies such as Iran, Russia, Afghanistan, North Korea, etc.
• Describe the pros and cons of your view on free trade, write a summary of your viewpoint.
Economics 101 Assignment Option #2
Question: How do we make the school store more profitable?
• Based on what you have learned today, create a pricing schematic that you think would maximize the revenue of the school store.
• List the items you would change (or create a matrix) and explain how your pricing scheme would maximize the revenue. Make sure you include the old and new prices of each item.