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TEXTBOOK: Ch. 1 notes - Coggle Diagram

- - - - there are changes to what is being produced overtime in different countries
        
        for example:
        
        today, in canada, agriculture accounts for 2 percent of total production, manufactured goods for 28 percent, and services (retail and wholesale trade, healthcare, and education are the biggest ones) for 70 percent
        
        today, in ethiopia, agriculture accounts for 35 percent of total production, manufactured goods for 21 percent, and services for 44 percent.
      - what determines the patterns of how much of something is produced?
        
        how do choices determine the quantities of products being produced?
    - - how things are produced, can be described by what resources we use
        
        factors of production: resources used to produce goods and services
        
        grouped into 4 categories
        
        land
        
        practically "natural resources" (which is the term we used in everyday language)
        
        labour
        
        the time and energy ppl put into the produce services and goods
        
        includes all physical and mental work needed
        
        quality of work depends on human capital
        
        human capital: the education, training, knowledge, and skills ppl have
        
        1 more item...
        
        capital
        
        capital: tools, instruments, machines, buildings, and other constructions that companies (and businesses) use to produce goods and services
        
        financial capital: money, stocks, and bonds
        
        financial capitals are something businesses can use to buy capitals
        
        1 more item...
        
        not used to produce goods and services (because it's not directly used; and its purpose is to allow businesses to borrow money to buy capitals)
        
        not a factor of production
        
        Entrepreneurship
        
        "human resources" who organizes land, labour, and capital
        
        are drivers of economic progress
        
        makes new ideas of what and how to produce something
        
        makes business decisions
        
        handles the risks of their decisions
        
        What determines how the factors of production are used to produce each good and service?
    - - depends on how much money a person has (their income), to buy a good or service
        
        so the decision of a company to determine a salary for someone, also affects the person's ability to buy something
        
        and therefore, in this way, a company's decision impacts an individual's decision
        
        people earn incomes based on the services (of factors of production) they own
        
        for example:
        
        land earns rent
        
        labor earns wages
        
        earns the most income
        
        are about 70% of total income
        
        capital earns interest
        
        Entrepreneurship earns profit
        
        "...probably know about other persistent differences in incomes. Men, on average, earn more than women; whites earn more than minorities; university graduates earn more than high school graduates" (pg. 4)
      - we can learn about who consumes certain goods and services by looking at the percentages of total income (earned by different groups of ppl)
        
        on average, people in the richest 20 percent earn more than 10 times the incomes of those in the poorest 20 percent
        
        huge inequality within the richest 20 percent, and the top 1 percent earns almost 15 percent of total income.
        
        Why is the distribution of income so unequal?
        
        can be caused by globalization
        
        as international trade becomes more common, ppl resort to having their products made in lower-cost countries; meaning, that they can have their products made at a low cost (workers get low pay)
        
        richest 20 percent earn close to 50 percent of total income
        
        20 percent of people with the lowest incomes earn about 5 percent of total income
  - - - though you might consider how your choices might affect other people and how you feel about that; essentially, it is your feeling that influences your choices
    - - something is for the social interest if it benefits the society as a whole
        
        how do you decide is something is for the social interest? it is easy to determine if something is of self interest
        
        if there are no losers
        
        for example:
        
        ted is an entrepreneur who hires 1000 works for work for $20 an hour
        
        $1 an hour more than they earned in their old jobs. Ted’s business is extremely profitable and his own earnings increase by $1 million per week.
        You can see that Ted’s decision to create the business is in his self-interest—he gains $1 million a week. You can also see that for Ted’s employees, their decisions to work for Ted are in their self-interest—they gain an extra $1 an hour (say $40 a week). And the decisions of Ted’s customers must be in their self-interest, otherwise they wouldn’t buy from him.
        
        his business makes everyone better off; therefore, it is of social interest (there are no losers)
    - - efficient: referring to something as something that can't be improved anymore
        
        for example: a resource can be called efficient if it can't make someone more better off, without risking making someone else worse off
        
        if someone can be made better off without making anyone worse off, then the situation doesn't count as efficient
      - in the ted-entrepreneur example: "it would also have been efficient if the workers and customers had gained nothing and Ted had gained even more than $1 million a week"
    - - questions about social interest are hard to answer...
      - 4 issues in the real world that tackle "fair shares" and "social interest"
        
        Globalization
        
        Information-age monopolies
        
        Climate change
        
        The COVID-19 pandemic
    - - expansion of international trade, borrowing and lending, and investment.
        
        for example, people in malaysia get work when nike produces sports shoes
      - can destroy many canadian jobs
        
        Workers across the manufacturing industries must learn new skills or take service jobs, which often pay less, or retire earlier than previously planned.
      - is the self-interest of consumers who buy low-cost goods, which are made in other countries
        
        and it is in the self-interest of the multinational firms that produce in low-cost regions and sell in high-price regions (textbook, pg. 6)
      - But is globalization in the self-interest of the low-wage worker in Malaysia who sews your new running shoes and the displaced shoemaker in Toronto? Is it in the social interest?
  - - - gaining and losing
    - - in simpler terms: choices happen after incentives are presented
    - - for example, choosing between studying, or texting with friends isn't an all or nothing scenario
        
        you can allocate a certain amount of time to each activity
        
        comparing the benefit of giving yourself a little more study time with the cost (what you lose as a result of choosing to study); is called making a choice at the margin
        
        the benefit you experience when you increase a certain activity is called the marginal benefit
        
        the opportunity cost of increasing (not of) an actvitiy is called marginal cost
    - - economists take into the human nature of making choices out of self-interest
        
        self-interested act gets the most benefit for you based on your view about benefit.
        
        though acts that are out of self-interest aren't always necessarily selfish
        
        we can predict what self-interested choices ppl tend to make, based on the incentives that are presented
        
        ppl often make decisions that make true: the marginal benefit exceeding the marginal cost
        
        reject options for which the marginal cost exceeds the marginal benefit.
        
        because who would want to lose more than they gain after making a choice?
        
        economists see incentives as the "middle point" of self and social interest
      - it is difficult to identify the incentives that result in self-interest and social-interest choices
      - if our choice are not of social interest, it is so because of the incentives we face
      - institutions can influence what incentives ppl face, as they make choices of self-interest
        
        examples of institutions: laws that help protect private property
        
        also, markets that allow "voluntary exchange"
- - - - it might set a trend for what kind of movies are released. for example, if a superhero movie is the successful movie that was released, more superhero movies may be released in hope to get more attention with that gen
      - can also ignite the creation of toys or merchandise based on the movie
    - - can affect when certain movies are released; like if the successful movie was christmas themed, then other movies during christmastime, might follow some aspects of what made that movie successful
    - - the fact that it is a successful movie might pull in new viewers, or other ppl; as ppl can be interested in watching a movie that they already know/heard that it is successful
  - - - so, in short, releasing more of what the viewers want to see (in a movie)
  - - - this influences the opportunity cost of hiring chris pratt by perhaps giving less of a chance of hiring someone else who hasn't been in the guardians of the galaxy movie
    - - or, in simpler terms, what you lose from choosing something
    - - neglecting other skills and talents of other actors and actresses
      - the number of opportunities/ppl you could've hired instead of chris pratt, is larger (opportunity cost); because he was an actor in a successful movie specifically
        
        but if there is no significant value difference of his acting vs someone else's, then what you would be losing in hiring chris pratt, would be less of a value
        
        use fruits as an example: if apples and pears are equally/very similarly delicious and healthy, you wouldn't be losing very much if you choose one or the other.
    - - having been in a successful movie, his salary would have increased; meaning that the movie producers would have to pay him more to act in their movies
        
        a higher pay being required may discourage some movie producers from hiring chris pratt, especially if they are not very well known, or have a tigher budget
      - in contrast, requiring a higher pay may also encourage a movie producer to hire chris pratt because it would indicate that he is a high quality actor
      - incentive: a reward that encourages a choice
      - what is the reward you get for hiring chris pratt (that discourages you from hiring someone else)?
        
        better reputation; the actor is popular
        
        what is something you get from hiring chris pratt, that you don't get from hiring someone else?
        
        workable actor? meaning, easy to work with; personality
        
        the actor has a good reputation; therefore, your movie might result in having a better reputation, or having a good reputation at least
  - - - continuous practice of studying skills throughout the summer sharpens your mind and prepares you for continuous studies during the fall semesters, etc.
    - - making more time in your later school schedule to take other courses you might be interested in
    - - may have less time in your day to dedicate to work during the summer, resulting in earning less money than if you were to not take summer school
    - - making time for when school is in session is also rational because then you can finish certain courses earlier, and study what you enjoy learning about
  - - - positive statement; it can be tested against facts
    - - normative statement: "should be", opinion statement
- - - - depends on values
  - - - for example, asking:
        
        Are computers getting cheaper because people are buying them in greater quantities?
        
        Or are people buying computers in greater quantities because they are getting cheaper? Or is some third factor causing both the price of a computer to fall and the quantity of computers bought to increase?
      - to answer questions regarding positive statements on cause and effect, they make and test economic models
        
        economic models: a description of some aspect of the economic world that includes only information that are needed for the purpose of the model
        
        For example, an economic model of a smartphone network might include features such as the prices of calls, the number of smartphone users, and the volume ("density") of calls
        
        irrelevant info that wouldn't be needed to be in the model, are like: colour or ringtone of phone
        
        uses economic models to answer questions regarding cause and effect
        
        "model of (a part of) the economic world"
        
        a model is tested by comparing the prediction to the fact
        
        but testing a model is difficult because it's hard to keep track of all the simultaneous changes that are happening in what we are observing
        
        to cope with this problem, economists look for natural experiments
        
        natural experiments: scenarios in the usual course of economic life in which the one aspect of interest is different, while the other aspects of economic life are similar (or comparable)
        
        also conduct statistics-based investigations, to try and find patterns
        
        also conduct economic experiments by putting ppl in different situations where they have to make certain decisions
        
        and changing up the influence of factors to analyze different responses
      - cause and effect; can also be looked at as "cause and result"
        
        or "what happens before something happens, that makes it happen; and what happens after something happens"
  - - - can also help provide the tool of evaluating marginal benefits and costs
        
        and tools for evaluating alternative solutions
        
        as well as helping think of solutions that maximize the resources
      - essentially, economics is used as a policy tool by analyzing problems in the economic world and in trying to find the marginal cost/benefit, etc. to make the best possible decision
        
        this is one way it can be by "clarifying" goals
    - - though they can't do much with advising on policy goal itself
        
        because policy goals are opinion-based (what someone thinks the rules should be)