Ah Test #2

Front 1

Locke on property

Back 1

Human labor is source of value, Gov't is to protect

Front 2

Enlightenment

Back 2

Unleash wants to expand economic growth....If we look to benefit ourselves it will eventually reduce scarcity

Front 3

Opportunity Cost

Back 3

value of the next best alternative (choosing a snickers bar over a milky way means that the snicker cost me a milky way)(Jewish BBall player)

Front 4

Judging Economic System

Back 4

1. Efficiency
2. Equity (fairness)
3. Freedom

Front 5

Law of comparative advantage

Back 5

Specialize in producing goods of which they are the low opportunity cost producer

Implications:
1.full employment of resources
2.widest gains from trade
3.inderdependendency-NBA, flights(NIKE)

Front 6

Transaction Costs

Back 6

-the costs incidental to performing an exchange: legal fees, delivery charges, advertising, overhead

-Decline in transaction cost increases the area of specialization and exchange

Front 7

Restrictions on Exchange

Back 7

Cannot buy flamable PJs or car without belts

Front 8

Law of Demand

Back 8

As Price of a service rises people will buy less of that good or service

Front 9

Law of Supply

Back 9

As a price goes up the will supply more (celebrity gossip and pictures)

Front 10

Equlibrium Price

Back 10

Where supply = Demand

Front 11

Role of Profits

Back 11

Pizza example: switches job to supply the demand, competition

Front 12

creative Deconstruction

Back 12

Destroying by creating (lightbulb destroys candle makers) (car destroys horses adn carriage makers)

Price Celings
Price Floors

Front 13

Price celings

Back 13

Rent control: celing stops it from getting to equilibrium

creates shortages and slums

Front 14

Price floors

Back 14

Hitting a floor trying to get to equilibrium

Unemployment, creates surpluses

Front 15

Figuring out what the market weakness is

Back 15

1. what is weakness
2. what did gov't do to help
3. consequenses

Front 16

Market Weakness

1.Imperfect Information

Back 16

Faulty into that causes non-mutually beneficial exchanges (refund policies, warrenty etc.)

Intervention:
-compensation through judicial system
-provide more information(cigs)
-direct regulation (licensing)

Evaluation:
-seems effective yet costly
-limit beneficial exchanges (limitations of licences, medical marijuana)

Front 17

Market Weakness

2.Externalities

Back 17

The cost or benefit to a third party not involved in the exchange.

Weakness:
1. disreguard for third party effects(polution from geneva)
2.goods or services involuntary

Intervention:
1.Define and enforce property rights(buying air that you can polute)
2. tax, subsidize
3. Direct Regulation (standard millage for cars)

Evaluation:
1. Effective but sometimes impossible
2. Difficult to calculate right level to tax or subsidy

Front 18

Market Weakness

3.Public Goods

Back 18

good that can be consumed by one without dimishing the amount available for others to consume.(lighthouse: All can use it, Television)
Weakness:free-rider problem causes public goods to be underproduced

Intervention:
Tax thr people and provide the good(police)

Evaluation:
1. No market signals to indicate the efficient quantity
2. Few incentives to be efficient

Front 19

Monopoly

Back 19

One-seller (utilities)

Natural Monopoly (postal service)will ever lower prices

Front 20

Inequality of material goods was accepted because:

Back 20

1. result og individual merit (virtue) operating from a fair start..(extra work, extra money)

2. Those with less are satisfied with condition or prospects(moderation due to religion)

3. Creates individual incentive which equals economic growth beneficial to all

Front 21

Inequality of material goods has become suspect because...

Back 21

1. Economic illiteracy masks virtue-prosperity connection. Result of greed, operationing from a head

2.Economic Progress (creative Deconstruction) & recession produce extreme inequalities, take blameless victims. (materilism=frustration)

3. Economic complexity & illiteracy masks incentive growth connection. Envy overpowers. economic rationality

Front 22

Measuring Economic Rewards

Back 22

1. Income
2. Mobility

Front 23

Measuring Economic Rewards:

Characteristics that affect distribution of INCOME

Back 23

1.family background
2.willingness to work
3.willingness to take risk
4.occupational choice(garbage collector vs. nurse)
5.willingness to relocate
5.education
6.religion
7.intelligence
8.extraordinary talent(Jim Carrey etc.)
9.Gender(male waiter at hooters)
10.race
11.luck
12.physical features

Front 24

Measuring Economic Rewards:

2. Mobility

Back 24

MARKETS ARE AMORAL:

-Only recognize productivity/consumer preferences
-sometimes offend our idea of fairness

EX: Roger Clemmins:baseball and high salary
Lebron James-unfair but not replacable

Front 25

How Gov't Defines Poverty

(know a lot)

Back 25

1.reported cash income
2.poor spend $1.94 for every $1 of reported income

3.doesn't include non-cash

Evalutaion of Gov't intervention:

1-ineffiecient
2-counterproductive(could make problem worse)
-Law of Supply problem
-corrosion of social ecology
-counter-incentive to personal and collective economic growth(allowing for inequality)
-counterfeit virtue (choosing to give to poor rather than being forced)

Front 26

5 Factors of economic growth

Back 26

Nothing comes close to effecting the way we live.

(Hand out Y)
1- Labor
2-Capitol
3-Natural resources
4-Technological change
5-Entrepreneurship

Front 27

Technological Change

Back 27

Expample of Sand Island

Seattle and Pants on head (hat) business

Front 28

4 U's

Family teaches virtue

Back 28

Resourcfullness
Industry
Competitiveness
Honesty/Integrity

R.I.C.H.

Family responsibility enlightens self-interest beyond the individual and beyond current consumption

Front 29

MARKET VS. COMMAND

Back 29

HANDOUT

Economic growth is a rising tide, when it goes up ALL ships go up (big or small)

Front 30

Regressive Taxaion

Back 30

as you make more, tax smaller percent of income

Front 31

Progressive Taxation

Back 31

Making more = getting taxed more

(Present time)

Front 32

Proportional Taxation

Back 32

Attempt at equality of results. % doesn't change no mater how much you make, flat tax.

Front 33

Robots taking over people's jobs

Back 33

-making robots creates more jobs
-men would more into other ares
-robots save more monsy to be spent in other areas to help economy

Same with farmers and better machines, there are not a huge # of unemployed farmers

Front 34

Infaltion/Recession

Back 34

HANDOUT

reforms to inflation:
1.indexation:tie inflation rate to a certain price
2.MONEY GROWTH RULE: Money supply needs to be tied to GNP(goods and services)

Front 35

Fallacy of Composition

Back 35

Beliving that what is good for one individual is good for the group

Front 36

Things that encourage Econimic Growth...

Question on test-

Back 36

DIAGRAMS Q, Z, Y, & 4U's

1.Prevent coercion and fraud
2.Provide money
3.Snsidize or create the transportation and communication networks
4.Define property rights
5.Enforce the exchange agreements
6.Maintaining a stabel political environment.
7.Encouraging healthy competition
8.Subsidizing positive externalities, providing public goods and alleviating other market weakness
9.Providing neede capitol
10.Funding research and development of new technology
11.labor
12.capitol
13.natural resources
14.technological change
15.entrepreneurship