Econ Exam 1
Terms in this set (54)
People using higher internal discount rates for near term time horizons (a day or a week). Ex. you'd rather receive $5 right now than $10 in a month.
Leads people to make decisions they regret.
1. Average global temperature has been rising since the mid 70s. The Arctic Ocean is getting warmer the fastest.
2. CO2 emissions and the amount in the atmosphere are rising.
3. Humans are the main source of CO2 emissions.
4. CO2 tends to warm planet.
5. No non-human source of warming clearly responsible.
Of CO2 are also rising, and raise average global temperature.
Reflection of the average coverage of ice that is melting/decreasing. A measure of the reflectivity of a surface.
The 2nd most important greenhouse gas.
What is an effect of warmer ocean waters?
Intensity of hurricanes.
When sulfuric aersols react with water. They are cooling and fall to the Earth first. Down substantially.
Pros of global warming
People up north have warmer winters, so less people die from freezing temperatures.
What places will suffer the most as a result of global warming?
The smallest islands, Bangladesh and India because they are so flat. Flooding from rising sea levels. Suffer GDP wise.
What is France doing about climate change?
Imposing eco-taxes, but now their government is threatened by being overthrown.
Liebig's Law of the Minimum
Biomass production in an ecosystem. The rate of a plant's growth dependent on it's scarcest resource.
What is biomass production limited by?
The minimum available necessary, biogeochemical elements in the ecosystem.
What happens when you run out of the major elements (N, O, S, etc.)?
You will halt the Biomass Production Function.
Even if you add capital or labor, then what?
That doesn't mean output will increase.
What are the most effective elements in fertilizers?
Nitrogen, Phosphorus, and Potassium.
An interrelated set of biogeochemical cycles driven by energy.
Energy vs. Metals
Energy dissipates (breaks up, spreads out), metals do not.
Solar energy -> plants (photosynthesis) -> animals -> eat plants -> other animals eat them -> die, fertilizes the earth.
Law of Entropy - 2nd Law of Thermodynamics
The total entropy of an isolated system can never decrease over time. In a closed system, entropy increases.
What did Erwin Shrodinger believe?
Life is an anti-entropic process.
I = PAT
Impact = Population x Activity (per capita economic income, GDP) x Technology
- Land, labor, capital
- Believed more population leads to more output per capita
- More specialization, more output. But, it depends on the size of the market.
Thomas Robert Malthus
Less popular and true theory that more population leads to famine and disease.
Niger in the Sehal region has the lowest per capita income in the world - the reason it's so low in population density (economies of scale) is due to the Sahara desert.
It may not be about population density, but rather the agricultural resources and production.
Natural population growth rate
Birth rate - death rate
R = ?
Birth rate - death rate + immigration rate - emmigration rate.
Rule of 70, doubling time
Assumes the population growth rate is constant. 70/100 x r
Pt = P0e^rt
Pt = population in time
P0 = population in base period (time zero)
Economies of Scale
A proportionate in all factors of production, leads to a more than proportionate increase in output.
Law of Diminishing Marginal Returns
If one factor of production is constant, then eventually increases, other factors will lead to smaller additions to output and Marginal Product falls. AKA smaller increases in output.
Low Level Malthusian Equilibrium Trap
Vicious cycle of poverty. Poverty leads to high birth rates (rural, low education, no government social security, and high infant mortality). Low savings = low investment capital = low economic growth.
First Welfare Theory of Economics
A competitive, complete, full in formation general equilibrium is Pareto Optimal.
Quantity supply = Quantity demanded in every market.
Cannot make one person better off without making somebody else worse off. "Efficiency". Possibility Pareto Frontier (ppf) is necessary but not sufficient for PO because you might not have the right amount.
True or False: PO is about income distribution.
What do monopolies lead to and why?
Nominal POs, because lower output means higher prices.
Net Welfare/Deadweight Loss
Lost consumer/producer surplus.
Used cars, insurance, finance, labor markets ("principal-agent problem")
When is a Laissez-Faire general equilibrium not Pareto Optimal?
When there's a Market Failure Approach - when the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.
4 Sources of Market Failure
1. Monopoly Power
2. Collective consumption goods ("public goods") ex. lighthouses. Harbor fee on the people that come in from sea that use them.
4. Imperfect information
Collective Consumption Good and their problem
Non-depletable and non-excludable. Free rider problem.
A positive benefit or negative cost not borne by agents generating or receiving it.
Positive examples of externalities
- Inventions. We use patents to internalize the benefits.
- Beekeepers and orchard owners. Voluntary internalization.
Negative examples of externalities
Pollution, like the coal dust of the London Fog.
- Subsidies for positive externalities
- Taxes for negative externalities
B/C. AKA, PV of Expected Future Benefits / PV of Expected Future Costs.
PV at a point in time.
Revenue or benefit stream over time.
Nominal interest rate equation
PV = 100/(1 + r)
Lower discount rate = ?
Higher value today.
PV is the sum of what?
The present values of the expected future stream of net returns.
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