world class education . by paul suozzo assistant professor of bus. studies ocean county college
TRANSCRIPT
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World Class Educationwww.kean.edu
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By Paul SuozzoAssistant Professor of Bus. Studies
Ocean County College
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1. Introduction2. Markets3. Consumer Theory4. Costs of Production5. Competition6. Monopoly7. Game Theory8. Inflation9. Economic Accounting10. Business Cycle & Unemployment11. Income & Expenditure12. Fiscal & Monetary Policy13. Taxation14. Trade15. The Future & Growth
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Fertilizer 0 1 2 3 4
Tomatoes 20 35 44 48 40
Avg. per Bag
/ 35 22 16 10
Marg. Prod.
/ +15 +9 +4 -8
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A B C D E
Shovels 80 75 65 45 0
Beach Chairs
0 10 20 30 40
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Opportunity Cost: the forfeited benefit of the next best activity
Marginal Analysis: making decisions considering only what can be changed
Ceteris Paribus: “while all other factors proceed as usual” Factors of Production: Land, Labor, Capital &
Entrepreneurship Law of Increasing Opp. Costs: extra units are only available
at an increasing cost Cost/Benefit Analysis: to be worthwhile, an effort’s benefits
must outweigh its costs Command Econ.: a system where government makes most
production decisions and owns most means of production (communism, socialism)
Market Econ.: a system guided by markets where most means of production are owned privately (capitalism)
Scarcity: when wants outnumber resources (opposite of abundance)
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Supply: a group of organizations providing a good or service for a fee
Quantity Supplied: a particular quantity of a good or service made available by a specific price
Supply Determinants: factors causing Supply to grow or shrink
(counterparts for above three exist for Demand) Shortage: when a lower than equilibrium price causes Quantity
demanded to surpass Quantity supplied (caused by P ceiling) Surplus: when a higher than equilibrium price causes Quantity
supplied to surpass Quantity demanded (caused by P floor) Equilibrium: when there is no pressure for change, the P/Q
combination that equate Qs to Qd Consumer Surplus: extra money consumers are willing to pay
for a good Producer Surplus: extra discounts suppliers are willing to
concede to sell a good Deadweight Loss: loss of surplus caused by market
interference
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Coefficient of Elasticity: change in Qd relative to a corresponding P change
Normal Good: a good whose demand increases with income
Inferior Good: a good whose demand decreases with income
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Item Price 1 2 3 4 5 6
Hot dog
$2 20 12 6 2 0 -4
soda 1 9 7 4 3 1 1
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Welfare: a person’s level of physical comfort Utils: unit in which personal satisfaction is measured Indifferent: when a consumer has no preference
between two options totals represent one’s preferences while trade-off’s
must always reflect prices Utility Maximization Rule: the last unit from each
category brings the same utils per dollar or else a more satisfying combination exists
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FC=240 TC MC VC ATC AVC AFC
1 307 67 67 307 67 240
2 360 53 120 180 60 120
3 414 54 174 138 58 80
4 500 86 260 125 65 60
5 600 100 360 120 72 48
6 726 126 486 121 81 40
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Stage
1 2 3 4 5 6 7 8
Output
100 225 400 600 800 1200 1550 1800
Input 50 75 100 150 200 300 400 500
Prdtvty
2 3 4 4 4 4 3.875 3.6
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Profit: proceeds remaining once all costs (both direct & indirect) are deducted
Fixed Costs: costs that remain constant despite level of production
Variable Costs: costs varying directly with production Efficiency:being able to complete the same task with less
resources Marginal Cost: cost brought about by another unit of
production Long Run: frame of time in which all resources can be
modified Scale Economies: change in efficiency brought about by
changing scale of production Productivity: output/input
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Short-run: frame of time where at least one factor of production cannot be varied
Shut-down: when a firm opts to make no output and incur a loss equal to fixed costs
Q*: output quantity that maximizes profit or minimizes loss
Price taker: when a firm has no influence over price Pure Competition: a market where many firms produce
a standard product at the same price Invisible Hand: Adam Smith’s metaphor for market
allocation
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Market Power: ability to influence price Monopoly: when a market is supplied by a single firm Allocative Efficiency: pursuing a goal until marginal
benefit (P) falls to equal marginal cost Productive Efficiency: minimizing per unit cost via mass
production Fair Return: producing until costs = revenues P Discrimination: offering customers same or similar
product for different prices based on willingness to pay Natural Monopoly: where cost per unit can only be
minimized if all production is handled by a single firm (usually utility co’s)
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Symmetrical: when two parties pose one another with the same circumstances
Dominant Strategy: when a best course of action offers better outcomes
Probable Outcome: outcome resulting from all parties pursuing their best course of action
Nash Outcome: when no party would opt to deviate from the probable outcome
Collusion Opportunity: when an alternative to the probable outcome exists to the benefit both parties
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Year Quant.
Q ch. Price Rev. Rev. ch.
P. Index
Real Real ch
1 10 / 1 10 / 67 15 /
2 12 +.20 1.5 18 +.80 100 18 +.20
3 15 +.25 1.33 20 +.11 89 22.50 +.25
4 10 -.33 2.25 22.50 +.125 150 15 -.33
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• Inflation: sustained increase in prices• Real Growth: increase in units of goods & services• Price Index: composite number representing the state of
prices
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Gross Domestic Product: Market value of all new final goods and services produced within a country during a year
Consumption: spending by households Durable Consumption: “household investments”,
household spending on items not quickly exhausted (cars, appliances)
Non-Durable Consumption: household spending on quickly expendable items (food, fuel, clothing)
Investment: purchases by business not intended for resale
Government Purchases: items purchased by government- not transfers
Net Exports = Export – Imports
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Long-run GDP: level of GDP needed to fully employ all resources Current GDP: current level of output regardless of sustainability Recession: 2 or more successive quarters without growth GDP Gap: current – long-run GDP Unemployment Rate: unemployed/(unemployed + employed) Labor Force: unemployed + employed Discouraged: jobless persons wanting but not looking for work Frictional: unemployed persons between employers Structural: the unemployed between occupations and/or locales Cyclical: employment caused by dips in industries Natural Unemployment: all unemployment excluding cyclical
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Autonomous Consumption: basic consumption regardless of income
MPC = new consumption / new income MPS = new savings / new income APC = consumption / income APS = savings / income Injection: new expenditures introduced in an economy Leakage: lost expenditures and new taxes and savings Expenditure Multiplier = 1/MPS
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Tax Multiplier = MPC/MPS Federal Reserve System: US central bank system that
divorces gov. from money supply control Discount Rate: rate of interest banks borrow from Fed Reserve Ratio: portion of deposits kept as vault cash
(reserves) Federal Funds Rate: interest rate banks borrow from
each other Term Auction Facility: Fed’s policy of making
anonymous loans to banks at a rate based on demand Easy Money Policy: lower Disc. Rate and Reserve Ratio,
selling of Treasuries and more lending via the Term Auction Facility
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Flat Tax: rate of tax that remains constant despite taxable amount
Progressive Tax: tax rate that intensifies as taxed amount increases
Effective Tax Rate: tax/taxable amount Lump Sum Tax: tax that remains the same regardless of
income Subsidy: when gov. helps pay for certain activity
(negative tax)
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C A L I
F O R I
N I A ID A H
O
Computer
50 25 0 10 5 0
Potato 0 50 100 0 62 125
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Comparative Advantage: when a country can make a product with a lesser opportunity cost
Tariff: port toll charged on imports Reciprocal Trade Agreement Act: a simplified and
more favorable set of trade rules, most favored nation status, the US extends to nations who engage in bi-lateral trade talks with US
Gen. Agree. On Tariffs & Trade: international convention to simplify trade and reduce barriers
World Trade Organization: international organization to remedy trade disputes and foster world trade
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Growth Compounding: when growth portions are added to the initial principal to further perpetuate future growth
Rule of 70: number of periods to double = 70/growth rate –or- growth rate = 70/number of periods to double