Hello, this is a summary for the first years course Introduction to Economics and Business on the Radboud University. I included all lectures and subjects in it. It is 14 pages and has (in my opinion) all of the important aspects of the course. Good luck studying!
Introduction to Economics and Business - Radboud University
Introduction:
Economic growth is measured in GDP and can exist because of;
- Productivity growth
- Physical and intellectual property rights
- Capitalism
- Want of humans to be productive and efficient due to incentives
Efficiency = the size of the economy or average income
Inequality = the distribution of the economy
Consequences of incentives:
- People abuse the system
- Incentives could cancel eachother out
- People do not care about the risk of the bank
Opportunity costs = implicit costs = net value
The economic problem
- What should be produced
- How much needs to be produced
- How is it produced
- Who should receive the product
Sunk costs fallacy = wrongly taken, or not taking, sunk costs into account
Diminishing marginal utility= the second product gives less happiness
Marginal analysis = What is the optimum quantity of a choice
(consists of marginal revenue and marginal costs)
Capitalism as an invisible hand = prices influence OC and choices
Maximum efficiency = marginal costs = marginal benefits
MAximum efficiency = where the marginal cost is the lowest
Most efficient point = closest to where marginal benefits are higher than marginal costs
Economic rent WTP(A) -EcoC(A) WTP(B) - EcoC(B)
Trade and exchange
, GDP= sum of all income of all citizens OR the sum of all value added
GDP per capita = total value of economy / amount of people (productivity)
Real GDP per capita = GDP corrected by inflation
PPP = purchasing power parity -> indicates income
Problem using GDP = only includes products and services that we buy or sell. -> inadequate
measure of economy. Also when wealth is destroyed it does not decrease or renting for
example does in increase GDP
PPF = Production Possibility Frontier
Aim: show advantages when the production and exchange changes
- Constant line means constant OC
- Not constant means OC are increasing
- Trade and exchange cause the PPF to shift outward because there can be produced
more in the same time/ with the same resources (welfare-enhancing effect)
Autarky = no trade and lot of specialization
Exchange in the market;
- Stimulates productivity growth through specialization
- Creates more welfare
- Less opportunity costs
Absolute advantage = can produce more
Comparative advantage = can produce at a lower opportunity cost
When the price is between the OC of both producers, trade
It causes specialization
AA = both producers should produce what they are the best at and then trade to get the
optimum quantity of goods in the most efficient manner
AA in both products-> not trade
Markets
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