Econ 240 1st Edition Lecture 4Outline of Last Lecture I. The Global Economy a. Physical Capital Differencesa.i. The physical capital differences on advanced economy from a developing economyb. Human Capital Differencesb.i. Human capital differences between advanced economies and developingeconomies II. Circular Flow ModelIII. Households and Firmsa. Households – individuals or people living together as a decision making unit b. Firms – Institutions that organize production of goods and services IV. Marketsa. Goods markets are markets in which goods and services are bought and soldb. Factor markets are markets in which factories of product are bought and sold V. Real Flows a. In factor markets:b. In goods market:VI. Money FlowsVII. Government in the Circular Flow a. Federal government expendituresb. Federal government revenue c. National Debt – Total amount government has borrowed to make expenditures that exceed tax revenue to run a government budget deficitThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.d. State and Local governments expenditures and revenueVIII. Circular flow in the Global economy Outline of Current Lecture II. The Economic Problem a. Production Possibility Frontierb. Production efficiency: When we cannot produce more of one good or service without producing less of something else c. Trade off: An exchange giving up one thing to get something else d. Free lunch: Getting something without giving up something else III. Specialization and Tradea. Absolute Advantage: if a person can produce more of several or all goods (or services) than another person b. Comparative advantage: if a person can produce a good (or service) at a lower opportunity cost than someone else Current LectureThe Economic Problem- Production possibilities frontier The boundary between: ▪ The combinations of goods and services that can be produced using available productive resources ▪ The combinations that cannot be produced - 1. Using available productive resources, only the combinations on or inside the PPF can be produced (attained)- 2. Production efficiency: When we cannot produce more of one good or service without producing less of something else - 3.A. Trade off: An exchange giving up one thing to get something else 2- 3.B. Free Lunch: Getting something without giving up something elseSpecialization and Trade- A person has absolute advantage if he she can produce a good (or services) than anotherperson- Person has comparative advantage if he/she can produce a good (or service) at a lower opportunity cost than someone
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