I Dont Know

CHAPTER 1 3, 4, 7, 9, 11

CHAPTER 2Homework 1, 3, 6, 9, 11

CHAPTER 3 1,4,5,7,10,12,15

February 2, 2006

v Ch. 1

v Economics: how to manage the scarcity of resources

Ш Scarcity: anything that has a price must be scarce (otherwise there won’t be a price; everything scarce; human nature is that we want more of everything because we don’t have enough, with the exception of contentment in Christ, not enough resources to produce goods and services)

§ Must make choices in order to maximize your resources

Ш Shortage: willing to pay the price but there are not enough produced

v Two parts of economics (based on individual behavior “Rational Self Interest;” maximize level of satisfaction; opportunity costs not always measured in monetary form, such as going to college instead of full time college)

Ш Microeconomics: Individual units examined

Ш Macroeconomics: Economy as a whole

v Make decisions as a whole on the margin with small increments; cost and benefit analysis; exploit opportunities to make yourself better and act on your benefit

v Economy works with the interaction of individuals and the country gains by trade

Ш Value goods differently (can specialize in one thing that you are more efficient at and can trade)

Ш This interaction will allow the markets moving to an equilibrium (a balance, meaning that you done want to do anything different because you are “happy;” it is automatic, and it doesn’t happen when the government gets involved)

Ш Leaving the market alone means that resources will be allocated efficiency (100% efficiency in the economy means that no one is upset over their jobs and such)

Ш Equitable Distribution goes against efficiency

v Why bad markets happen to good people

Ш Apparently need government direction at times (load of bull)

v Ch. 2

v Economic models: Ways of presenting complicated economic relationships (eliminates the parts of the picture you don’t need)

v Production Possibilities Frontier: any point within the curve is inefficient, any point outside the curve is unobtainable/unfeasible

Corn Cars

100 0

90 1

70 2

40 3

0 4

v Technology will help you to expand your production possibilities and you can produce more of both because you can task more resources to other resources, maximizing efficiency (economic growth; cars doubled in example)

Corn Cars

100 0

90 2

70 4

40 6

0 8

v Absolute advantage: better at both trades

v Comparative advantage: have to give up less resources in order to have a different trade

Ш Example: US and Japan (best way is to have 4 apples and 4 oranges in US and 2 apples and 2 oranges for the Japs)

2/9/06

us Japan