SESSION ONE
WHAT IS ECONOMICS?
WHY DO WE STUDY ECONOMICS?
OK YOU ARE A NURSING MAJOR WHY DO YOU HAVE TO STUDY ECONOMICS?
ECONOMICS IS THE STUDY OF HOW WE ALLOCATE RESOURCES AMONG ALTERNATIVE USES TO SATISFY HUMAN WANTS.
WHAT IS MACRO ECONOMICS
WHAT ARE RESOURCES?
WHAT ARE FREE RESOURCES?
WHAT ARE ECONOMIC RESOURCES?
LAND
LABOR
CAPITAL
CONCEPT OF OPPORTUNITY COST - THE VALUE OF WHAT CERTAIN RESOURCES COULD HAVE BEEN PRODUCED HAD THEY BEEN USED IN THE BEST ALTERNATIVE WAY.
WHAT DOES AN ECONOMIST DO?
1. ANALYSIS DATA
2. EXPLAIN OR INTERPRET DATA
3. FORECAST FUTURE ECONOMIC EVENTS.
WHO DO ECONOMIST WORK FOR
1. FEDERAL GOVERNMENT -
MANY SPECIALIZATIONS - AGRICULTURE - SUGAR
FEDERAL RESERVE - MONEY SUPPLY - INTEREST RATES, CURRENCY SPECIALIST
COUNCIL OF ECONOMIC ADVISORS - ADVISES PRESIDENT ON ECONOMIC POLICY
FEDERAL RESERVE - MANY MEMBER ECONOMISTS.
IN GENERAL ECONOMIST LOOK AT THE BIG PICTURE.
WHERE AN ACCOUNTANT LOOKS AT THE FINE DETAILS AND A FINANCIAL EXPERT LOOKS AT THE FINANCIAL PICTURE AND ECONOMIST MIGHT LOOK AT THE WHOLE INDUSTRY OR THE ECONOMY AS A WHOLE.
2. BANKS -
3. INSURANCE COMPANIES.
4. STOCK BROKERS.
5. STATE AND LOCAL GOVERNMENTS.
6. COLLEGES AND UNIVERSITIES.
7. THINK TANKS.
8. WORLD BANK, INTERNATIONAL MONETARY FUND.
THE TASKS OF AN ECONOMIC SYSTEM
1. MUST DETERMINE THE LEVEL AND COMPOSITION OF SOCIETY'S OUTPUT.
2. MUST DETERMINE HOW EACH GOOD AND SERVICES IS TO BE PRODUCED.
3. MUST DETERMINE HOW THE GOODS AND SERVICES THAT ARE PRODUCED ARE DISTRIBUTED.
4.MUST DETERMINE THE RATE OF GROWTH IN PER CAPITA INCOME.
HOW ARE THESE QUESTIONS ANSWERED IN OUR SOCIETY?
HOW ARE THESE QUESTIONS ANSWERED IN NORTH KOREA?
HOW ABOUT SWEDEN?
IN THIS CLASS WE ARE GOING TO LOOK, PRIMARILY, AT HOW MARKET PRICES EFFECT OUR SOCIETY AND OUR DECISIONS.
THE PRICE OR PROFIT MOTIVE DETERMINES WHAT IS PRODUCED. HISTORY OF COMPUTER PRICING.
WHY DO AMERICAN FARMERS USE EXPENSIVE MACHINERY TO PRODUCE CORN - HARVESTERS, TRACTORS, ETC. WHY DON'T THEY JUST USE OXEN PULLED PLOWS LIKE OUR ANCESTORS?
HOW MANY HERE WOULD LIKE TO OWN A NEW BMW? HOW MANY HERE DRIVE A 1996 BMW? WHY DON'T YOU ALL DRIVE A NEW BMW??
IS OUR SYSTEM FAIR IF YOU DON'T DRIVE A BMW AND YOU WANT TO? ISN'T OUR ECONOMIC SYSTEM SUPPOSED TO SUPPLY ALL OUR NEEDS??
WHAT ARE THE LIMITS OF OUR PRICE SYSTEM OF DISTRIBUTION
1. DISTRIBUTION OF INCOME UNEVEN
SHOULD A SECOND STRING CATCHER MAKE A MILLION DOLLAR PER YEAR WHILE A STARTING NURSE A HOWARD COUNTY GENERAL HOSPITAL MAKES $32,000 PER YEAR.
PUBLIC GOODS - GOODS AND SERVICES WHICH CANNOT BE PROVIDED THROUGH THE PRICE SYSTEM BECAUSE THERE IS NOT WAY TO EXCLUDE CITIZENS FROM CONSUMING THE GOODS WHETHER THEY PAY FOR THEM OR NOT. NATIONAL DEFENSE.
PRODUCTION POSSIBILITY CURVE
TANKS VERSUS CARS.
SHOW P.P.C. FOR TANKS VS CARS.
QUESTIONS CAN PRODUCTION BE INSIDE P.P.C.? YES
CAN PRODUCTION BE OUTSIDE P.P.C. ? NO
DEFINE CAPITAL GOODS. - PLANT AND EQUIPMENT USED TO MAKE OTHER GOODS.
CONSUMER GOODS - ITEMS THAT CONSUMERS PURCHASE LIKE CLOTHING, FOOD, DRINK.
MARKET & PRICES
**HOW MANY PEOPLE HERE OWN A CAR?
**WHAT DETERMINES THE VALUE OF YOUR CAR?
** WHAT DETERMINES THE PRICE YOU GET FOR YOUR CAR?
WHAT IS A MARKET ?
A MARKET IS A GROUP OF FIRMS OR INDIVIDUALS THAT ARE IN TOUCH WITH EACH OTHER IN ORDER TO BUY OR SELL SOME GOOD.
THE PRICE OF A CAR IS SET BY DEMAND AND SUPPLY
** OK WHAT DETERMINES THE DEMAND FOR YOUR CAR?
DEMAND IS DETERMINED BY
A. CONSUMER TASTES
B. INCOME LEVEL OF CONSUMERS
C. NUMBER OF CONSUMERS IN THE MARKET
D. LEVEL OF OTHER PRICES
** WHAT DETERMINES THE SUPPLY?
A. TECHNOLOGY
B. "INPUT PRICES" - PRICES OF COMMODITIES USED IN MAKING CAR
EQUILIBRIUM PRICE - A. THE INTERSECTION OF THE DEMAND AND SUPPLY CURVES B. THE PRICE LEVEL WHERE DEMAND AND SUPPLY ARE IN BALANCE.
PRICE SYSTEM AS A MEANS OF DETERMINING WHO GETS WHAT
WHAT ARE ADVANTAGES
1. SPEED - PRICE SYSTEM CAN RESPOND QUICKLY
2. IMPARTIAL - UNLIKE POLITICAL DECISION - PRICE SYSTEM IS TOTALLY IMPARTIAL - IF YOU HAVE THE DOUGH YOU GET THE STUFF
3. STRONG INCENTIVE TO PERFORM
WHAT ARE DISADVANTAGES?
1. THOSE WHO CAN'T WORK ARE REDUCED TO POVERTY.
MENTALLY ILL
RETARDED
SICK
ELDERLY
2. THERE ARE SOME GOODS THAT CANNOT BE PROVIDED THROUGH PRICE SYSTEM
WHAT ARE THEY?
NATIONAL DEFENSE
PARKS
ENVIRONMENTAL BENEFITS
3. SOME FIRMS BENEFIT FROM RESEARCH AND WORK OF OTHERS. BELL LABS DEVELOPED PRODUCTS THAT WERE COPIED BY OTHER FIRMS.
4. SOME FIRMS CAN DAMAGE ENVIRONMENT AND CAUSE DAMAGES THAT HAVE TO BE PAID FOR BY OTHERS.