Economic Lessons

Economics Learning Objectives

  • Foundations
    • Discuss the difference between microeconomics and macroeconomics.
    • Evaluate the role that rational self-interest plays in economics analysis.
    • Explain why economics is a science.
    • Distinguish between positive and normative economics.
      • Positive Economics = Making descriptive statements or predictions
      • Normative Economics = Value judgments about policies.  Relates to outcomes that are good or bad.  A statement of what “ought” to be.
  • Chapter 2
      • Evaluate whether even rich people face the problem of scarcity.
      • Understand why economics considers individuals’ wants but not their needs.
      • Explain why the scarcity problem induces individuals to consider opportunity costs.
      • Discuss why obtaining increasing increments of any particular good typically entails giving up more and more units of other goods.
      • Explain why society faces a trade-off between consumption goods and capital goods.
    • Chapter 3, 4
      • Explain the law of demand.
      • Discuss the difference between money prices and relative prices.
      • Distinguish between changes in demand and changes in quantity demanded.
      • Explain the law of supply.
      • Distinguish between changes in supply and changes in quantity supplied.
      • Understand how the interaction of the demand for and supply of a commodity determines the market price of the commodity and the equilibrium quantity of the commodity that is produced and consumed
      • Discuss the essential features of the price system
        • Exchange and Markets
        • Transaction Costs
        • Platform Firms
      • Evaluate the effects of changes in demand and supply on the market price and equilibrium quantity.
      • Understand the rationing function of prices.
      • Explain the effects of price ceilings.
      • Explain the effects of price floors.
      • Describe various types of government-inspired quantity restrictions on markets.
    • Chapters 5 and 6
      • Explain how market failures such as externalities might justify economic functions of government.
      • Distinguish between private goods and public goods and explain the nature of the free-rider problem.
        • Functions
          • Legal System
          • Promoting Competition
          • Providing Common Goods
          • Ensuring economy wide stability
        • Describe the political functions of government that entail its involvement in the economy.
          • Government sponsored and Government-inhibited goods
          • Income Redistribution
        • Discuss the central elements of the theory of public choice.
          • Collective Decision Making
          • Theory of Public Choice
          • Similarities with Market Choice
            • Opportunity Cost
            • Competition
            • Similarity of Indiviudals
          • Differences
            • Government can price goods at zero price
            • Use of force
            • Voting vs Spending
          • Chapter 6
            • Distinguish between average tax rates and marginal tax rates.
            • Explain the structure of the US tax system.
            • Understand the key factors influencing the relationship between tax rates and the tax revenues that governments collect.
            • Explain how the taxes governments levy on purchases of goods and services affect market prices and equilibrium quantities.