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I. Basic Terms
A. Economy is the social science
concerned with the use of scarce resources
like land and labor to
fulfill unlimited human.
B.
Resources are the inputs, want satisfaction is the output
C. Key Concepts for understanding and analysis
1. Scarcity of resources
results in the need for choices by participants.
2. Purposeful behavior by
participants
(buyers
and sellers) is exhibited
to enhance their own rational
self interest. See
Economics in the dock 6 min video
3. Marginal
analysis where the change in benefit received is balanced with
the change in cost is a
common purposeful behavior.
4. Fallacy
of composition: applying to the whole that which is true for a part
without adequate proof. 1 and
3 are odd numbers, so four is odd number.
This fallacy is the basis of police profiling.
See
Why Do People Continue to Believe Stupid Economic Ideas - Mark Blyth
5 min
video
5. Fallacy of
division:
This is the assumption that if something is
true for the
whole then it must be true
for its parts.
The absolutely worst abuse here
involves inferring from an
average that all elements are average.
6. Post
hoc fallacy: Assumption
that correlation proves causation.
This is related to the concept in law
of circumstantial evidence.
7. Cum
Hoc Fallacy :simultaneous correlations while post hoc refers
to sequential
correlations.
D. Economic methodology
1. Positive
economics
a.
What something is
b.
Objective, can be measured
c.
Example: measuring disposable personal income which is an
individual's salary after taxes
d. A
Theorem on the Methodology of Positive Economics
2. Normative
economics
a.
What something ought to be
b.
Subjective, difficult to measure
c.
Requires value judgments by citizens, Political Action Committees (PAC's),
politicians, economists, etc.
d. Examples: should the minimum wage be increased,
should defense spending
increase and social spending be lowered
3.
Descriptive economics
a.
Looking at the real-world to develop Economic Theory
b. Economic
Theory
1. Generalizations concerning economic behavior based upon
real-world
observations, empirical by nature
2. Economic theories are objective "positive economics"
3. Assumes behavior is rational and economic (self-serving)
4. Example: as the price of a product increases, consumers tend to buy less
c. Economic Policy
1. Application of economic theory to solve economic problems
2. Economic policies are subjective, "normative economics".
3. How society makes economic choices such as in the 1980's when
a. spending
for the elderly (Social Security) increased
b. spending for children
(Head Start) decreased 1234
Unit I. Review
Economics, Resources, Scarcity, Rational
Self Interest,
Marginal Analysis, Fallacy
of
Composition,
Fallacy of
Division,
Post
Hoc Fallacy, Cum
Hoc Fallacy
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II. Economic
Models
A.
Definition
1. Simplified
generalizations to represent of real-world economic activity
2. Requires Ceteris Paribus: Latin for holding other
economic variables constant
See Ceteris Paribus
Trap
B.
Designing Models
1. Models may be quantities or qualitative
2. Economic
Models 3 minute video
3. Three Pitfalls
to model analysis
a. Restrictive, unrealistic assumptions
b. Omitted details
c. Are economic models falsifiable?
4. Model representations are not
always correct
a.
Are economic models falsifiable?
b.
Pfleiderer on The Misuse of Economic Models 1 hour podcast
c. Models such as the Production Possibility Curve
chapter 2 and supply
and demand, chapter 3, explained in the next chapter
provide a simplified
description of how some aspect of an economy works.
d.
Beware of economic textbooks
11/30/14
Unit II. Review
Simplified generalizations represents real-world economic activity
requiring Ceteris Paribus
or holding other
economic variables constant
III.
United States Economic Goals
A.
Employment
Act of 1946 set goals in response to a
Soviet 5-year
economic plans.
B.
Humphrey
Hawkins Act of 1978 added goals.
1. Economic growth
2. Full employment of all
economic resources
3. Price stability (low
inflation)
4. Positive balance of payments
(international flow of dollars)
5. Economic freedom
6. Equitable distribution of
income
7. Economic security (if you have A
through F, you have G)
C.
2016 Economic Report of the President gives the President's annual
view on our achieving these goals.
Video 1 hr. 27 min. on 2014 report Please
Unit III.
Review Economic
growth, Full employment of all
economic resources,
Price stability (reasonable
inflation),
Positive balance of payments, Economic freedom,
Equitable distribution of
income Economic security
IV.
Important Economic Disciplines
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Other Stuff
Economics Video Lectures,
History of Capitalism
Videos from Cornell X
One-Page
Chapter Review
Macro Test Review 1,
Macro
Test Review 2,
Macro Test Review 3,
Micro Test Review 1, Micro Test Review 2,
Micro
Test Review 3
Justice Brandies'
Gilded Age Observation
Is becoming a predominant 21st Century belief? |
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Economic
Policies have improved TV's, made them a necessity, even on a phone. Is your
watch next?
As a kid in the 1950's we didn't have
a TV so I only saw one when I visited my cousin. Eventually my dad realized they
wouldn't destroy education and we got a 12 inch set. |
