Download Economics: Choices, Macroeconomics, and Production - Study of Goods, Services, Scarcity - and more Study notes Introduction to Macroeconomics in PDF only on Docsity! Economics is the social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. Macroeconomics is the study of the performance of the national economy and the global economy. Two big economic questions! 1. How do choices end up determining what, how and for whom goods and service get produced? 2. When do choices made in the pursuit of self-interest also promote the social interest? The Big Tradeoff is the tradeoff between equality and efficiency that redistribution programs confront society with Ceteris paribus is Latin meanings “other things being equal” Fallacy of Composition is the (false) statement that what is true of the parts is true of the whole or that what is true of the whole is true of the parts Post Hoc Fallacy is Latin for “after this, therefore because of this” Time-series graph is see how a variable has changed over time and how its value in one period relates to its value in another period. Also reveals trends, fluctuations around its trend, lets us compare the variable in different periods quickly. Plots time on x-axis. Cross-section graph shows the values of an economic variable for different groups or categories at a point in time. (bar chart) Scatter diagram plots the value of on e variable against the value of another variable. PPF is the boundary between those combinations of goods and services that can be produced and those that cannot Production efficiency is achieved is we cannot produce more of one good without producing less of some other good. Resources are misallocated when they are assigned to tasks for which they are not the best match The opportunity cost of an action is the highest values alternative forgone Opportunity cost is a ratio. It is the decrease I the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF Remember principle of decreasing marginal benefit Allocative efficiency is when we cannot produce more of any good without giving up some other good that we value more highly To expand PPF in the future, we must devote fewer resources to producing consumption good and some resources to accumulating capital and developing technologies Comparative advantage is when one person can perform the activity at a lower opportunity cost Absolute advantage is when a person is more productive than others People become more productive in an activity after repeatedly producing a particular good or service, this is call learn-by-doing, which is the basis of dynamic comparative advantage. That is a comparative advantage that a person or country possesses as a result of having specialized in a particular activity To make decentralized coordination work, four complementary social institutions that have evolved over many centuries are needed. Firms, markets, property rights, money A relative price is the ratio of one price to another and its an opportunity cost
