Econ review - Lynn Usher Notes for Microecon PDF

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Lynn Usher Notes for Microecon...

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Chapter 12 I. Introduction Product markets-top circular flow diagram S&D for Goods & Services Firms=Suppliers; Households=Demanders Resource Markets-bottom circular flow diagram S&D for Productive Resources Firms=Demanders; Households=Suppliers II. Nonhuman and Human Productive Resources •Nonhuman resources: •Physical capital-(tools, machines, buildings) •land •natural resources •Human resources: •Skills of workers •Knowledge of workers •investment in resources (nonhuman and human) •put some current resources into producing more resources, that can be used in future to produce more goods/services •Investment in nonhuman resources-how? •Physical Capital- produce tools, machines & buildings •Land-learn better ways to use land; conserve soil/upgrade quality •Natural Resources-find more natural resources; exploration, discovery & development •Investment in Human resources-how? •worker's skills-training •worker's knowledge-education; •note: Investment in resources takes place when: the benefits of a larger future output > the current reduction in the production •Similarities and Differences between human and nonhuman •Similarities: -machines depreciate -humans age & knowledge needs update; -Both depreciate •Differences -Humans cannot be bought or sold only their knowledge & skills -Humans can negotiate: i.e.: take less money for: improved...working conditions...location...prestige III. The Demand for Resources

•Description: called 'Derived'-stems from D for the Products being produced; P&Q: Inverse relationship-curve downward sloping •Elasticity of Demand for resources: •Availability of substitutes: -more=increase elasticitiy (becomes flatter) -less=decreases elasticity 'INELASTIC' (becomes steeper) •Time V. Supply of resources •Description: •P&Q: direct relationship-curve upward sloping •Elasticity of Supply for Resources: •Mobility of resources: -Immobile=inelastic (few alternative uses) •'Human'-high skilled jobs: architect, engineer, Dr. •'Non-Human'-most machines and land -Mobile=elastic (many alternative uses) •human-unskilled jobs-high school education •non-human-machines-trucks haul diff products •land-rural areas: develop •urban areas: build taller buildings •Time: -LR=increased elasticity (becomes flatter) -Medicare – elderly -Medicaid – low income Increased health care on third person Decreased incentive NOT GOOD OUTCOME FOR SOCIALIZED CARE IN SOME COUNTRIES: 1. 2. 3. 4.

Cannot afford unlimited free health care to all Waiting list occur when PRICE plays secondary role, non-price factors used for rationing Absence of expensive treatments Only wealthy patients can travel for treatments

EDUCATION:

SAT DECLINED Cross country comparison: US ranked ONLY 12th Real spending/student in U.S: $4269 to $10,441 – more than doubled in 37 years. U.S spending 46% more than the average 10 countries!! Schools have monopoly power – no competition. No incentive to compete, no incentive to efficiency Consumers: have limited choices – not directly paying Private schools: consumes pay twice U.S. COLLEGE AND UNIVERISTIES ARE OMPETIVE AND RESULTS ARE GOOD a. student have choices b. financial aid can be used c. U.S. leads the world in: 1. variety of programs 2. high quality research 3. quality facility 4. % of H.S. graduates attending If consumers (parents) pay directly, schools will operate more efficiently leads to more efficient allocations of resources. Alternatives: School vouchers: Government collect taxes and gives each student a certificate ‘voucher’ which equals cost education/student Students choose favorite schools & pay with vouchers Some advantages: Increase school competition Parents: freedom to make choices Increase in diversity, structure/non-structured, religious/secular etc. Objections: beneficiaries would be high income Americans whom already send their children to private schools.

Charter schools: Operate under contract “charter” with government agency meets standards, funded with taxes $$. Operated independently. Tax Deductions – private schools:...