Macroeconomics

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Macroeconomics

• Introductions

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Definitions

• Economics
• Is the study of how people make choices.

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Definitions

• Why do we have to make choices?
• We must choose because our wants are unlimited
  but our resources are limited.

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Resources aka the factors of production

• 1. Natural resources (land)
• 2. Labor or human effort
• 3. Physical Capital machines used to make other
  products
• 4. Human Capital skills and abilities
• 5. Entrepreneurial Ability

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Scarcity

• Because our resources are limited, we dont have
  enough of everything to make all the things that
  people want.
• Time can also be scarce, and so can money.

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Macroeconomics

• Is the study of how nations make choices
• We will study how national economies grow and
  change.

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Ceteris paribus

• Latin for all things being equal.
• In a graph or example, ceteris paribus means that
  all other variables are fixed.

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3 Basic Economics Questions

• 1. What to produce?
• 2. How to produce it?
• 3. Who gets it?

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Four types of Economic Systems

• Market
• Command
• Traditional
• Mixed

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Market

• Where buyers and sellers exchange things.
• Markets are not necessarily physical places
  anymore. E-bay is a cyber-market.

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Production Possibilities Curves

• With a given amount of resources we can only
  produce a limited amount of goods or services.
• The graph on the board will illustrate this
  concept.

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Opportunity Cost

• Is the value of the choice given up.
• The 1965 Corvair Monza Story
• Opportunity Cost and the Production Possibilities
  Curve

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Marginal

• Always think extra when you see the word
  marginal in economics
• The margin of averages example on the board

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Selling the Answers to the Test
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Demand

• Demand is the quantity that consumers are willing
  and able to buy at various prices
• The law of demand states that as price goes down,
  the quantity demanded increases.

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Supply

• Supply is the quantity that producers are willing
  and able to sell at various prices.
• The law of supply states that as price increases
  the quantity supplied will increase

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6 reasons to draw an new Demand Curve

• 1. Size of group
• 2. Tastes of Group
• 3. Expectations

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6 Reasons (contd)

• 4. Income
• 5. Price of substitute good
• 6. Price of complementary good

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4 reasons to draw a new Supply Curve

• 1. Number of producers
• 2. Expectations
• 3. Technology
• 4. Costs of factors of production

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Homework