Mike Pascutoi
Trade and Exhange
- · Law of Large Numbers
- Large numbers are needed for any study to succeed
- · Feedback loops only work well when people actually care
- o People need to feel guilty about doing a bad job
- o People must have incentive
- · All important economic analysis involves trade and exchange in some way
- · Trade and Exchange assumes
- o A sense of personal property
- o Property rights
- o Silver Rule
- · Three basic questions of Economics:
- o What should be produced?
- o How do we produce it?
- o How do we allocate the goods from the producers to the consumers?
- · Inputs===èBlack Box======è Goods
- · Factors of production
- o Land
- § Any physical object that was pre-existing as a part of nature
- § Example: Iron
- o Labor
- § The number of people (or mammals) working on the project
- § Example: Iron miners
- o Capital
- § Definition: Something that needs to be produced in order to produced one or more other goods
- · Example: An iron crowbar
- § 1) Physical Capital
- ·
- § 2) Human Capital
- · All the skills one learns in order to produce a certain good (multiplied by every possible person available in the economy)
- · Economic Activity
- o Government proposes it to be overall spending
- o However, it also includes PSST
- § Patterns of
- § Sustainable
- § Specialization and
- § Training
- o Technology is changing fast enough that the Factors of Production are forced to adjust almost too fast
- · Why Do People produce?
- o To acquire wealth
- · What is wealth?
- o One form of wealth: actual goods which are produced
- · In an ideal trade situation:
- o All people get equal value in the exchange, but they value what they receive more
- o Example: Rizzo had two Kirby Puckett baseball cards, and one summer he traded one for Buddy Biancalana (trade was mutual)
- o KP: $200.00
- o BB: @0.02
- o Both people got a relatively same amount of value, though Rizzo lost actual wealth
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