Economics 2 More of the Basics

Microeconomics The study of the decisions made by individuals and small firms/companies Why do you (a rational person) buy the things you do? To profit Profit of enjoyment, time, or money However, people are not always rational Why do companies make the things they do To Maximize Profit Efficiency- Make the most money possible while spending the least possible

Motives We have to make choices because of scarcity We make those choices based on the best possible outcome (or we should) (Rational) This is a trade off – what you give up to get what you want What you give up is called Opportunity Cost The value of the next best thing If you buy an Iphone vs Gucci Purse The opportunity to buy something else The opportunity lost Cost and Value are very individual What has value/cost to me may not have value/cost to you

Macroeconomics The study of large economies (United States, Ohio, Europe) The study of the entire economy (the world) The study of a whole economy and not just a part of it

Economic Theory Classical-The economy has cycles that are self correcting Sometimes we’re boom, sometimes we’re bust Supply Side Economics-Get the businesses to produce more by lowering taxes on businesses. This will increase supply thus lower prices and get people to buy Top Down Keynesian-Get the people to buy more product by giving them money Bottom Up

Global Economy Tariffs-Taxes on incoming goods (imports) Free Trade-The belief or practice of countries trading with each other without tariffs Fair Trade-global trade that follows rules Protectionism- When a country tries to protect its own companies/goods

Global Economy NAFTA-North American Free Trade Agreement Removes all trade barriers between U.S., Canada, and Mexico EU-European Union An agreement between most European nations to act as a single economic unit (no tariffs between countries, a single currency, a joint planning system) OPEC-Oil Producing and Exporting Countries Trading agreement between big oil countries to set the price and production of oil