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Economics 101

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 .

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Economics 101

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  1. Economics 101 Prof. Edgren

  2. 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?

  3. Macroeconomics Dealing with the decision making of an economy as a whole. Microeconomics Dealing with how individual markets behave.

  4. Macroeconomics Think LARGE!

  5. Command vs. Market Economies Which is better?

  6. 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?

  7. Examples of Command Economies Think COMMUNISM • North Korea • China • Russia

  8. 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

  9. Trade ANY two countries will benefit from trade! This is true even if one country can produce ALL goods more cheaply.

  10. 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.

  11. Specializing Countries focus on what they're good at. Countries will trade for other goods they cannot produce efficiently

  12. 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.

  13. Trade Barriers • Tariffs • Quotas • Subsidies

  14. 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!

  15. Buy American?

  16. Why you SHOULDN'T Buy American False reasons to buy American made goods: • Patriotism • National Security • Jobs

  17. Be American and allow Free Trade!

  18. Microeconomics Dealing with how individual markets behave.

  19. 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.

  20. The Supply Curve Price Quantity

  21. The Demand Curve Price Quantity

  22. Supply and Demand Surplus Supply Price Shortage Demand Quantity

  23. Equilibrium Supply Price Equilibrium Price Demand Quantity

  24. Price Elasticity Revenue Price

  25. Questions?

  26. Economics 101 Assignment Option #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.

  27. 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.

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