| Economics Notes 8-28-07 |
[28 Aug 2007|12:17pm] |
Economics
8-28-07
Professor Cohick
Study Questions
1. How do individuals make decistions?
2, What are the alternative organizing mechanisms a society can choose?
3. How do these alternative organizing mechanisms differ in answring vital economic questions?
4. What is the payoff when there is state protection of copyright?
5. What does the production possibilities curve show us?
6. Why do we want economic growth?
Principal Assumption
People act rationally
- Plan ahead
- Think things through
- Gather information
- Recall past experiences
People want to better themselves.
- Improve their net worth.
- Obtain satisfaction.
- Obtain happiness.
Needs Vs. Wants
Need a car
Want a Mercedes Benz
Need food
Want a 50 dollar steak
Satisfying Unfilled Wants and Needs
Rational people set priorities.
- Satisfy the highest priority first.
What satisfies?
Goods
- things produced
Services
- actions produced
Resources
Inputs into a production process.
- Land - natural resources(petroleum, wheat, air, water, etc)
- Labor - people working
- Capital - tools and equipment needed
- Entrepreneurship - brilliant idea
Figure 1-1. Transformation Process
Input --------------- > Process --------------------------- > Outputs
^ ^ v
Resources < ------ Technology can Goods and services
improve the process that satisfy wants and
or the capital goods needs
Production Process
Inputs are processed into outputs.
- Inputs = resources
- Outputs = goods and services
- Process = how the transformation is done
Efficiency
Defined:
- get the maximum salable output
- from the lowest possible cost of input
- while minimizing the waste
Technology
Defined:
- the application of knowledge
- to improve the process, or
- to improve the capital input
In 1900 in the United States, half of the workers worked in agriculture. Today, 2% work in agriculture.
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