Economics Notes

In: Business and Management

Submitted By goofy
Words 7244
Pages 29
Chapter 1 – Reasoning with Economics: Models and Information
• Economists base much of our thinking on simplified models of reality that neglect many details o Models that apply to a broad range of situations must be simple, but they can help you think logically no matter what happens in your market.
• Why be abstract when you have facts? o Reality is so complex and our mental capacities so limited that we must be selective in what we think about.
• Economists are human and they have values and beliefs that might render their objectivity suspect o Positive economics describes and analyzes things as they are (or as objectively as they can be seen) o Normative economics is about how things “ought to be” – it explicitly acknowledges the researcher’s values.
 Whatever positive theory may say, an economist’s normative views on prostitution or the drug trade might lead her to recommend that these activities remain illegal.
• Rationality o Economics studies the choices people make in the face of constraints that limit their options o Economics studies the allocation of scarce resources among competing goals.
 Underlying both definitions is an assumption that people act rationally, with an eye towards attaining objectives they have chosen. o Rationality does not mean that people are computers
 People may not perfectly understand their own preferences or do not know how best to overcome the obstacles that stand between them and their goals. o What rationality offers is a place to start the analysis.
 Math and graphics in economics textbooks are there to help us better understand the logic of rational choice, and can often help us to avoid some mistakes of purely verbal reasoning.
 Once we understand theoretically rational outcomes we will be better able to analyze the behavior of people with less perfect minds – like yours and mine.
 The…...

Similar Documents

Notes

...information system that identifies, measures, records and communicates understandable, relevant, reliable, and comparable information about an organization’s economic activities. · Recordkeeping, or bookkeeping, is the recording of financial transactions, either manually or electronically, for the purpose of creating a reliable bank of data · Primary objective of accounting- to provide useful info for decision-making · Accounting info results from the accounting activities of identifying, measuring, recording, reporting, and analyzing economic transactions. 1. What is the major objective of accounting? · Accounting is an information and measurement system that identifies, measures, records, and communicates understandable, relevant, reliable, and comparable information to people that helps them in making better decisions. It helps people in business to identify and react to investment opportunities, and better assess opportunities, products, investments, and social[->0] and community responsibilities. 2. Distinguish between accounting and recordkeeping. · Recordkeeping is the recording of financial transactions and events, either manually or electronically. While recordkeeping is essential to data reliability, accounting is this and much more. Accounting includes identifying, measuring, recording, reporting, and analyzing economic events and transactions. It involves interpreting information, and designing information systems to provide useful reports that monitor and......

Words: 5455 - Pages: 22

Notes

...childhood over the past few centuries have been remarkable. In the preindustrial era in Europe, an era of high infant and child mortality when life for many was "nasty, brutish and short," childhood does not seem to have been regarded as a sphere of life entirely separate from adulthood. Children were considered "little adults" and, as soon they were able, they were expected to perform adult duties. With the struggle for existence dominating all of life, there was little time for childhood or childrearing as we think of them today. With the rise several centuries ago of the industrial revolution and the modern nuclear family--the family of husband and wife living apart from other relatives, childhood became a very different phenomenon. The new economic conditions enabled many mothers to devote themselves full time to childrearing, the home became a mostly private sphere, and the view of children and childhood significantly changed. Children came to be regarded as very different from adults, and childhood became a time of play, diminished work responsibilities, and formal learning. The quality of early childhood experiences began to be conceived as having a major influence on adult outcomes, and each child was considered to have a unique personality to be developed, rather than being born with vices that needed to be expunged. The new family put child development at its highest level of priority. To help families the commercial toy industry came into being, along with the......

Words: 3840 - Pages: 16

Economics of Global Trade and Finance Semester 1 Notes

...domestic company in domestic market. Due to this dynamic business setting, the trade policy has to emerge and adapt it self to international demands and cause economic development. Comparative advantage theory of David Ricardo was the basis of free trade policies. Opponents of these policies argue that comparative advantage has lost its importance in a globally shrinking world. It is commonly believed Tariff and Non-tariff barriers, Miscellaneous Protection Techniques – Dumping, Subsidies, Cartels, and Commodity Agreements that free trade developed o the model of comparative advantage compels trade on less developed countries with unfavorable terms of trade. On the other hand, the world got segmented on several occasions with several reasons during World Wars and years of cold war. Protectionism which developed as a means of local policy polarized world on the basis of political ideology and development. Protectionists believe that free entry of foreign goods into domestic markets without being subject to tariffs or other forms of taxation, lead to disadvantage and loss of development. Free trade Vs protection The commercial policy of a country enables a choice between free trade and protection. If the choice is protection, it may suggest methods of protection and extent of protection. Presently the world economic order does not encourage free trade. The choice is only between the methods of protection and the extent of protection. However, there are several cases......

Words: 2566 - Pages: 11

Economic Growth Notes

...Economic Growth * Aggregate production function relates the aggregate output (Y) to: (a) Physical capital (b) Labor (c) Index of aggregate productive efficiency Y = F(AL, K) * Y is a flow variable because it measures GDP in a given period * K and L are stock variables, can measure at a given point in time * Y measures the services produced by K and L in period or instant t (e.g. hours of computation and hour of labors affects output, not just number of computers) * Y = 100K + 40L * One computer works 100 hours per week; each labor works 40 hours a week. If there are 2 worker then L=2; computer = 4 then K=4 * Assume economy is working at full potential * Capital is depreciated at constant proportionate rate, * L is assumed to be homogenous (everyone has same skill, education, productivity) and it grows at rate n. * If n>0 growing exponentially, n<0 declining exponentially, n=0 stagnant * Growth of labour is due to growth of population * A is defined as costless labour-augmenting technological progress * A multiplies the labour input, while leaving capital unchanged (e.g.: new organization routines, rearrangement of the flow of material in a factory, better management of inventory, other changes that do not require knowledge to be embodied in new equipment) * A is also known as index of productive efficiency or index of productivity or level of technology * A grows at an exponential rate of......

Words: 2795 - Pages: 12

Notes

...CHAPTER 6 THE FINANCIAL SERVICES INDUSTRY FINANCE COMPANIES Outline I. Introduction II. Size, Structure, and Composition of the Industry A. Major Types of Finance Companies III. Balance Sheet and Recent Trends A. Consumer Loans B. Residential and Commercial Mortgages C. Business Loans III. Regulation LECTURE NOTES LO – Compare and contrast finance companies to commercial banks using information throughout the chapter. I. INTRODUCTION LO – Know the definition of finance companies (basically, the contents of the following paragraph). ● The primary function of finance companies is to make loans to both individuals and corporations. Services provided by finance companies include consumer lending, business lending, and mortgage financing. Some of the loans are similar to commercial bank loans, such as consumer and auto loans, but others are more specialized. Finance companies differ from banks in that they do not accept deposits, but instead rely on short- and long-term debt. Additionally, finance companies often lend to customers commercial banks find too risky. II. SIZE, STRUCTURE, AND COMPOSITION OF THE INDUSTRY ● Finance companies were originated during the depression when General Electric Corp. created General Electric Capital Corp. (GECC) as a means of financing appliance sales customers unable to get installment credit from banks. By the late 1950s, banks were more willing to make......

Words: 1808 - Pages: 8

Ap Economics Notes

...AP Macro Economic notes: Other Points to Remember: Fiscal Policy — Congress stabilizing the economy through taxation and spending (budgeting) policies, limitations include that Congress only determines the budget annually or so, expansionary policy causes deficits, contractionary is unpopular. - Discretionary — a change to address a specific economic situation
- Automatic — built in policies like unemployment compensation, progressive income tax, etc... Other Review: Calculating % increase — (2nd year data - 1st year data) / 1st year data then multiply by 100 to get percentage Equation of Exchange — MV = PQ GDP = C + I + G + (exports - imports) [Expenditures Approach] OR GDP = W + I + P + R + Depreciation + Indirect Taxes [Incomes Approach] Investment spending (capital) – low interest rate to borrow money 
Financial investment (bonds & securities) – high interest rate for high rate of return Production Possibilities Curve (Use to show economic growth) The PPC shows economic growth and is shifted by changes in resources, including capital investment, and productivity. Aggregate Demand and Aggregate Supply Graph (Use to show output and price level) Money Market with Side-by-Side Investment Demand Graph (Use with Monetary Policy) Loanable Funds Market Graph (Use with Fiscal Policy) Supply of Loanable Funds is determined by the amount of savings in a nation and actions of the Federal Reserve. Exchange Rate Graphs Before they produce their first...

Words: 4764 - Pages: 20

Economics for Managers Learning Notes

...Economics – Group 1 Learning Miscellany 1) ------------------------------------------------- Introduction Economics is not an exact science, as it has to factor-in human behaviour. It assumes that the market is logical or rational in its behaviour. We know that the actions of humans are not always rational, hence events like the economic crash in 2008. No matter how much history teaches us, we still sometimes take irrational actions. The principals explained in Greg Mankiw’s book “The Principles of Economics” are based on ten principles, which are difficult to image in the real world. It is as if you have to “put on hold” your rational thoughts in order to understand the models used. The economy is influenced by government policies and businesses driven by profits. Businesses like governments can have beliefs that are motivated by left, central and right winged policies, depending upon where you live. These can influence how we manage society, either purely from a profit driven perspective or from an equal balancing of profit and social good. 2) ------------------------------------------------- Miscellany Weekly Learning Notes a. General Introduction (D) In recent weeks considerable national media attention was given to the story of people queueing to buy a development of new houses in Swords, North County Dublin. This raised the question whether we are witnessing the re-emergence of a “bubble” in the housing market and whether we had learned little......

Words: 1994 - Pages: 8

Economic Analysis Country Note Book

...ECONOMIC ANALYSIS I. Introduction The People's Republic of China (PRC) is the world's second largest economy by nominal GDP and by purchasing power parity after theUnited States. It is the world's fastest-growing major economy, with growth rates averaging 10% over the past 30 years. China is also the largest exporter and second largest importer of goods in the world. On a per capita income basis, China ranked 90th by nominal GDP and 91st by GDP (PPP) in 2011, according to the International Monetary Fund (IMF). The provinces in the coastal regions of China tend to be more industrialized, while regions in the hinterland are less developed. As China's economic importance has grown, so has attention to the structure and health of the economy. As the Chinese economy is internationalized, so does the standardized economic forecast officially launched in China by Purchasing Managers Index in 2005. Most economic growth of China is created from Special Economic Zones of the People's Republic of China. The construction of the road system of Beijing–Shanghai Expressway was completed and opened to public usage in early 2000 for access of transportation on logistics, travel and tourism around the most populous and densely economic active areas of Chinese Mainland II. Population A. Total The demographics of the People's Republic of China are identified by a large population with a relatively small youth division, which is partially a result of the China's one-child policy. ...

Words: 6452 - Pages: 26

Notes

...Chapter 16 Models with Binary Dependent Variables An interesting group of applications uses a dependent variable (y) that takes the values of either 0 or 1 (a binary variable – commonly known as a dummy variable or indicator variable). Example A problem in transportation economics is to explain the choice between driving a car and taking the bus when commuting to work. For a random sample of N = 21 workers who commute to work the mode of transport is coded as the dummy variable: 1  yi =  0  individual i drives a car to work individual i takes the bus to work The choice of transportation may be influenced by a variety of factors. A key variable is: xi the extra time in minutes needed for a bus journey compared to travel by car (this may be negative to indicate that a bus journey is faster than using a car), for i = 1, . . . , N. 1 Econ 326 - Chapter 16 The linear probability model explains the choice variable by the linear regression equation: y i = β1 + β 2 x i + e i for i = 1, 2, . . . , N Estimation by the least squares principle (OLS) gives parameter estimates of β1 and β 2 as b1 and b2 . For some value of interest x 0 a prediction is calculated as: y 0 = b1 + b 2 x 0 ˆ ˆ The predicted value y 0 has the interpretation as the probability that the event will occur ( y = 1 ) given the value x 0 . For the transportation to work example, y 0 is the probability that an ˆ individual will drive a car to work given a difference in travel time for a bus journey......

Words: 924 - Pages: 4

Notes

...Text Only, Southwestern (United States), fourth edition, 2004 (Palepu). Background: Accounting is called the language of business for at least two reasons. First, accounting terms such as sales, revenues, profit, net income, costs, gross margin, expense, and capitalize are widely used in business. Any businessperson is expected to understand those terms. Second, managers rely on accounting to understand an organization’s economic condition at a point in time and its economic performance over a period of time. As a result, they use accounting information to communicate with others. Managerial Perspective on Financial Accounting will help you understand publicly available financial statements for publicly traded companies and financial statements prepared for internal use. It is also an introduction to financial statement analysis and valuation methods. The basic financial accounting methodology, double-entry bookkeeping, was first published in 1494. However, double-entry bookkeeping was first used in the 1100s to help merchants monitor economic performance of their trading ships in the Mediterranean. Since those rules are nearly identical to the ones we now use, it is safe to say that managers and others find accounting useful, even if the rules are far from perfect. To understand the benefits and weaknesses of accounting, it helps to understand why managers use financial accounting. Those needs are often different from the needs of investors or financial......

Words: 2809 - Pages: 12

Economic Notes

...Transactions- economically speaking- we live our lives through our transactions w/ other people. Not a world of self sufficiency, it’s a world of transactions. Biggest part of our economic lives is the tool of exchange. Think more deliberately about the transactions entered into. Second tool- the accounting equation. We take the transaction entered into and put it into the accounting equation. Accounting is making a record of transactions, so they can be understood. Accounting equation Is the balance sheet. It is the most important financial statement. All other statements come back to BS in the end. Assets= liabilities + equity GAAP vs IFRS- international Two types of assets- current and long term. Current assets- cash, inventory, AR around for a year or under. Value in sale Long term assets- plant, equipment, land, vehicles. Anything that can be depreciated. around for longer than a year. Value in use. Current Liability- due within a year. Accounts payable Mortgage payment next 12 months Long Term Liability- due after a year Bonds payable Mortgage payment next 29 years Contributed Equity- what investors have put into the company Common stock Preferred stock Earned Equity- Net income (amount made as a result of operations of company) Revenues-expenses=net income Net income can be paid out in dividends Keep in company as retained earnings. Framework- Accounting at its very heart is very simple. Taking every transaction entered......

Words: 471 - Pages: 2

Maths for Business and Economics Notes

... amn    then  is a matrix with dim  c11 c12  c1 p  c n c22  c2 p   21  , where c  a b C  ik kj ij      k 1    cm1 cm 2  cmp  • Note, for  to be meaningful, the number of columns of  should be equal to the  number of rows of  6 Examples • • 1 3 2 4 Let  5 7 6 1 = 8 3 1 4 2 5 7 19 5 5 3 ,  0 25 ,   28 2 4 7 7 1 3 6 6 1 3 0 2 4 , then 5 9 12 19 26 20 25 8 19 = 8 43 2 4 22 50 3 9 0 • It is important to note that usually,  • Even if  .   exists,  may not be defined, for example,  1 2 5 ,  3 4 6 7 Useful properties ′ ′ ′ • Transpose of product:   • Left distributive law:   • Right distributive law:   • Associative law:   • Exercise:  Prove the above properties for 2×2 matrices  , and .  ∙ • Exercise:  Confirm the following three points by example – – – ,     except in special cases 0 does not imply that  or  is 0 and  0 do not imply that  8 Trace of a square matrix • Trace of square matrix is the sum of its diagonal elements n tr ( A)   aii i 1 • • For square matrices  and  , tr ( A  B )  tr ( A)  tr ( B ) tr ( A ')  tr ( A) .  (note, both   n  tr ( AB )   ( AB )ii     aik bki  i 1 i 1  k 1  n n m m n   aik bki   ( BA) kk  tr ( BA) k 1 i 1 k......

Words: 6927 - Pages: 28

Study Notes for Economic Development

...Week1. Introducing Economic Development: A Global Perspective & Comparative Economic Development Absolute Poverty: a situation of being unable to meet the minimum levels of income, food, clothing, healthcare, shelter and other essentials. (over 40% of the world’s population lives on less than 2 dollar per day). Subsistence Economy: an economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life—food, shelter and clothing. (A subsistence economy is a non-monetary economy which relies on natural resources to provide for basic needs, through hunting, gathering, and subsistence agriculture. "Subsistence" means supporting oneself at a minimum level; in a subsistence economy, economic surplus is minimal and only used to trade for basic goods, and there is no industrialization.) Development:The process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom. Developing countries: Countries of Asia, Africa, the Middle East, Latin America, eastern Europe, and the former Soviet Union, that are presently characterized by low levels of living and other development deficits. Used in the development literature as a synonym for less developed countries. Traditional economics: An approach to economics that emphasize utility, profit maximization, market efficiency, and determination of equilibrium. Political......

Words: 2923 - Pages: 12

Notes

...important determinants and clues to your present condition. Whenever you return to the doctor, he or she pulls out a file which contains all the notes from past visits. This file is a history of your health. Doctors understand very clearly that the past matters. * Some of you might be thinking that these examples are not very compelling because they both deal with the very recent past—they are not what we think of when we think of history. Let me give one final example that is more to the point. In 1917 the Communists took control of Russia. They began to exercise control over how the history of their country ought to be told. They depicted the tsar as oppressive and cruel. The leaders of the revolution, on the other hand, were portrayed in a very positive light. The Communist government insisted that these leaders, and in particular Lenin, understood more clearly than any one else what Russia needed and what course of action the government ought to follow. According to the official history, Lenin made no mistakes and he passed his virtually infallible understanding on to the other leaders of the party. The official history presented Lenin and Stalin as kind, compassionate, wise, nearly divine leaders. Consequently, difficulties that people in the Soviet Union experienced were all attributable to capitalism. The nation’s economic backwardness, the need for a massive military and tight security, and domestic crime were all ultimately tied to the influence of capitalistic......

Words: 13668 - Pages: 55

Macro Economics Class Notes

...What is the right supply chain for your product? by Marshall L. Fisher Introduction Much technology and brain power has been applied to improve supply chains. Companies are able to capture customers’ voice by using sophisticated marketing tools. Their goal is the accurate and quick response to market demands. Mass customization, automated warehousing and agile manufacturing are the means leading to that goal. Despite these efforts, many supply chains have never been worse. Adversarial relationships among partners as well as lack of coordination have lead, in many cases, to an unpredictable rise of cost. The excess of one product and the shortage of another is a common symptom. Why companies are unable to improve their supply chain performance? How can you avoid these problems? Is your product functional or innovative? The most crucial issue is the comprehension of the connection between the nature of demand and the type of supply chain you need. The fundamental problem is the mismatch between the type of product and the type of supply chain. Therefore you have to specify, first, the type of your product. Experience has shown that there are two categories of products: functional and innovative. There are some criteria , such as life cycle and t unpredictability of demand, to make up your mind whether your product belongs to the first or the second category. Functional products Functional products are those which satisfy basic needs, such......

Words: 1971 - Pages: 8

Mr. Selfridge | Watch movie | Communication Theory - 3244 Words