Notes

Class Notes- 9/1/09

Capitalist= money determines three questions

Command= government answers three basic economic questions

1. What= dictator or central planning committee decides

2. How= Government decides

3. For Whom= gov decides

Socialism= helps ppl out

-low prices

-full employment

-gov congtrol key industries

-mixed economies

-no competition/no incentives so ppl don’t work

-say MIXED rather than socialist

Economies in Transition

Two processes=

- Privatization- sees state-owned industries sold to private individuals and companies

Nationalization- sees private economies taken over by state

Scarcity

• Limited resources for unlimited wants

• Resources: land, capital, labor, enterprise

• One of most scarcest resources is clean, sustainable environment

Payment to factors of production

• Factors of production each earn different form of income

  Factor	Reward
  Land	Rent
  Labour	Wages
  Capital	Interest
  Enterprise	Profit

Ceteris Paribus

Definition: assumption that nothing else changes that will effect the outcome when making a generalization

Positive and Normative

Positive Statements

• statement that is provable by nature

• can be true or false but can be proved

Normative Statements

• matters of opinion or statements of value

• cannot be proven

• tend to contain words such as ought, should, fair, and inequitable.

Economic Growth

• increase in the productive potential of the economy

• measured by increase in country’s real level of output over period of time

Economic Development

• process where there is improvement in everyone’s life in the country

• country may have growth but not development

• GDP per capita is the best indicator/measure of development

Development definition:

• increase availability and widen distribution of basic life-sustaining goods

• raise level of living which will also generate greater individual and national self esteem

• expand range of economic and social choices available to individuals and nations by freeing them from servitude and dependence both in relation to other people + nation states and to forces of ignorance and human misery (Michael Todaro)

Sustainability

• The ability of the environment to survive its use for economic activity.

• Must have neutral effect on resources to sustain.

• Resources must be renewable to they will not run out in the future.