Economics For Dummies

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Economics For Dummies by Mind Map: Economics For Dummies

1. Notes

1.1. Brainstorm stage

1.1.1. Note important concepts and a brief summary when needed, then go back and organize the chapter.

1.1.2. Cite pages if you feel it a good idea

1.1.3. I think I should develop a system to make citations easy, for easy reference. Check note box.

1.1.4. need to be careful where I put my page citations, since i might put various tidbits of info from diff pages under a generalized category

1.1.5. should create a node for organizing the book by concept, idea, place, definition, etc ... as well as by chapter

1.1.6. should have a node for most important info, node for technical stuff perhaps, node for less important stuff perhaps...

1.1.7. This icon means that there needs to be something elaborated, or at least should be examined again

1.1.8. nodes include: concept, definition, people, places, times, misc, notes

1.2. Important notes

1.2.1. remember to categorize nodes so that the broadest categories are very few words and (ideally) only the last node has a lot of info on it

1.2.2. read a couple paragraphs at a time, AND THEN summarize. otherwise you get caught up in noting every little detail even if it isn't really important

1.2.3. Perhaps give a brief chapter overview, or something like that

1.2.4. For definitions, have parent and child nodes for sub-topics of a general topic - but also have child nodes as their own parent node, as separate entities

1.2.5. Chapter 4 needs some revisions; I was drunk while typing this up lol.

1.2.6. Add graphs and visual representations for the topics -- would be gratefully helpful

1.2.7. Get a book on concept/idea maping...maybe they are more efficient? idk

1.3. What I have completed thus far

1.3.1. Some touching up of ch1

1.4. Revise this later; too convoluted

1.4.1. Information Changes in production costs changes the supply curve The things that make production more costly will shift the supply curve up, and the things that lower costs will shift the supply curve down price/quantity relationship is therefore linear; more quantity = higher price that he asks for production costs rise as people make more of something, therefore suppliers ask for more money for larger quantities minimum price at which someone is willing to sell an amount of good or service

1.4.2. Graph Representation A) Supose you off Mr. Babbage $1 per cabbage, and then you let him choose how many cabbages he wants to produce B) He will want to produce exactly 10 cabbages and no more C) This is because for 1-9 cabbages, the cost of production is less than what you're paying him. D) Example: Consider point A - his production cost is 50 cents per cabbage. That means that if you're going to pay him $1 per cappbage, hell be making a nice profit. Similarly, his because his cost for producing six cabbages is also less than $1 per cabbage, he'll also want to make six cabbages. The same holds for 6,7,8 and 9 cabbages. E) At 10 cabbages, he is indifferent, because his cost per cabbage is $1 and you're offering him $1. In such cases, economists assume that he'll produce the 10th just to keep the buyer happy. F) Note that Mr. Babbage won't, however, produce Point C if you were offering him $1/cabbage. This is because his cost of production is $1.50 per cabbage, and he could lose money. Supply Curve

1.5. Link to e-book

1.6. i really fucking like how i organized the part in "Bringing supply and demand curve together" > Equlibrium...look at the child-nodes (concept, definition, graph). shit should be really easy on the eyes like that.

1.6.1. also, you can set up the parent nodes beforehand, and then come back to them at a later time, while continuing with something else. which is cool.

1.7. Ch 5 needs to be understood more, and elaborated on a bit. Need to look into it as a separate study; could be very helpful.

1.8. this book can act as a primer to become accustomed to economics. but i should wait to get micro/macro and other economics stuff before i really start trying to grasp anything precise and stuff.

2. Book

2.1. Part I

2.1.1. Economics: The Science of How People Deal With Society Chapter 1: Discovering What Economics Is and Why You Should Care Concepts Definitions People Notes Chapter 1 Most Important Concepts Chapter 2: Cookies or Ice Cream? Exploring Consumer Choices Concepts Definitions Notes Ch 2 MCI Chapter 3: Producing The Right Stuff The Right Way To Maximize Human Happiness Concepts Definitions Notes

2.2. Part II

2.2.1. Microeconomics: The Theories of Consumer and Firm Behavior Chapter 4: Supply and Demand Made Easy Concepts Definitions Notes Chapter 5: Getting to Know Homo Economics, the Utility-Maximizing Consumer Definitions Concepts Chapter 6: The Core of Capitalism: The Profit Maximizing Firm Concepts Definitions Notes Chapter 7: Why Economists Love Free Markets and Competition Definitions Concepts Notes Halts Chapter 8: Monopolies: How Badly Would You Behave If You Had No Competition? Definitions Concepts Notes Halts Chapter 9: Oligopoly and Monopolistic Competition - Middle Grounds Definitions Concepts Notes Halts

2.3. Part III

2.3.1. Applying the Theories of Microeconomics Chapter 12: Taking the Pulse of Health Economics and Finance Definitions Concepts Notes Halts Chapter 11: Market Failure - Asymmetric Information and Public Goods Definitions Concepts Notes Halts Chapter 10: Property Rights and Wrongs Definitions Concepts Notes Halts

2.4. Part IV

2.4.1. Macroeconomics: The Science of Economic Growth and Stability Chapter 13: Measuring the Macro-economy Definitions Concepts Notes Halts Chapter 14: Inflation Frustration - Why More Money Isn't Always A Good Thing Definitions Concepts Notes Halts Chapter 15: Understanding Why Recessions Happen Definitions Concepts Notes Halts Chapter 16: Definitions Concepts Notes Halts

3. Most Important Concepts


5. I'm gonna treat this book as a primer, to introduce me to the general concepts and vocabulary. I will wait until I start reading books on Micro/Macro, Monopolies, etc to learn more technical stuff. Just take it easy with this book. Don't get frustrated with trying to understand everything. Finish up my Political Phil & Thinking and Deciding for sure. I should wait until i learn stats & probability before i delve any further into statistical inference / inductive logic and stuff like that. stick to concept until i regain some math knowledge. so if there's every any math involved in any of my books, JUST TAKE IT EASY. don't get frustrated if it doesn't sink in. YOU NEED TO DO EXERCISES FIRST, in a math book that is devoted to teaching that math. don't expect to become a guru in expected utility theory by reading Thinking and Deciding, for example.

6. i should start my logic book over from scratch and work my way up again. this time i can skim through, but still, brush up on what you've forgotten.

7. realize this: now matter how broad or specific you decide to make your studies, YOU WILL ALWAYS NOT REMEMBER EVERYTHING PERFECTLY. so recognize your limitations. you must not let things frustrate you. FOCUS ON YOUR ACHIEVEMENTS RATHER THAN YOUR LACK OF ACHIEVEMENTS.

8. We're calling this one quits for now. I think I have enough knowledge to start on another Economics book. But I need to learn the theory and concept more, and this book just isn't providing it for me.

9. Glossary

9.1. T-Z

9.1.1. Total surplus consumer surplus + producer surplus

9.1.2. Trade deficit when imports exceed exports

9.1.3. Trade surplus when exports exceed imports

9.1.4. Traditional economy traditional economy is one in which production and distribution are handled along the lines of longstanding cultural traditions. Example: in medieval Europe, you couldn't typically be part of the gov or attain high military rank unless you were born a noble

9.1.5. Trusts in the 19th century cartels were called "trusts"

9.1.6. Util one unit of happiness of satisfaction

9.1.7. Utility Definition unit of measure for satisfaction or happiness types of utility Marginal utility Diminishing marginal utility

9.1.8. Variable costs depends on revenue (production costs, labor wage costs for employees, etc.)

9.2. R-S

9.2.1. Rational expectations explains how rational people change their behavior in response to policy changes in ways that limit their effectiveness of those changes

9.2.2. Real price what you can trade to get a good or service, regardless of the price. (For example, a $10 steak in 2010 might cost you 1 hour of labor at McDonalds. In 2020 the same steak might cost you $20, but you 1 hour of labor might earn you the same steak.) (so in otherwords, in 2010, your wage was $10/hr, and in 2020, it was $20/hr, meaning the real price of the steak stayed exactly the same.

9.2.3. Recession (contraction) period when an economy's output of goods and services declines

9.2.4. Recovery (expansion) period of time when output of goods and services increases

9.2.5. Revenue The total amount of money that a firm receives

9.2.6. Running a Profit Revenue exceeds cost

9.2.7. Running a loss Costs exceeds revenue

9.2.8. Shocks unexpected bad events (terrorist attacks, natural disasters etc)

9.2.9. Short-Run Shutdown Condition When a loss-making firm chooses to shut down production immediately, since, given their circumstances, the size of the loss that it would make by shutting down immediately is less than the size of the loss that it would make by continuing in operation and producing output until its fixed-cost contracts expire.

9.2.10. Socially Optimal Quantity amount of output that maximizes benefits for society given its limited resources

9.2.11. Stable Equilibrium The intersection of the supply and demand curve. It is stable because the supply and demand curve always gravitates to this point.

9.2.12. Statistical discrimination using observations, cues, characteristics, etc of people to clump them into a certain demographic of people

9.2.13. Sticky when prices are hard or slow to adjust

9.2.14. Subsidize support (an organization or activity) financially. To secure the assistance of by granting a subsidy.

9.2.15. Sunk-costs costs that have already been made and which should therefore not affect your current and future decision making

9.2.16. Supply Curve shows the minimum prices at which someone is willing to sell various amounts of a good or service

9.2.17. Supply Elasticity Perfectly Inelastic Supply Price has no effect on the quantity supplied. Production cost is non-existent Perfectly Elastic Supply Production costs don't increase for additional product units supplied.

9.3. P-Q

9.3.1. Perfect Inflation When the prices of all goods and services increase proportionally

9.3.2. Perfect competition When a firm competes against many other firms in an industry, producing identical goods

9.3.3. Philanthropic a person or organization) seeking to promote the welfare of others, esp. by donating money to good causes; generous and benevolent.

9.3.4. Planned expenditures amount of money that households, businesses, government and foreigners would like to spend on domestically produced goods and services

9.3.5. Positive Demand Shock When demand for goods and services increases after a shock

9.3.6. Positive externality something that is detrimental or costly to a third party

9.3.7. Price system a system where price serves as the signal to direct resources (ie: in market economies)

9.3.8. Price taker Economists call firms under perfect competition "price takers" because they are forced to charge a fixed price for their product.

9.3.9. Producer surplus the difference between what the producers actual costs and market equilibrium price (when its in the producer's favor)

9.3.10. Product differentiation each firm in an industry produces a slightly different product than the others

9.3.11. Production possibilities frontier (PPF) the line on the graph that divides the area into two parts... combinations of output that are possible to produce given your limited supply of labor (below the line), and those that are not possible to produce (above the line) the curve shows your output combinations that are possible when you are productively efficient above curve = not possible below curve = inefficient balanced technology that increases ability to produce all goods equally biased technology that increases ability to produce certain goods more efficiently than others

9.3.12. Productively efficient firms produce the services and goods at the lowest possible cost

9.3.13. Property right (ownership) gives a person exclusive authority to determine how a productive recourse can be used. poorly designed property rights generate perverse incentive to do bad things. pollution issues and species loss are direct results of poorly designed property rights.

9.3.14. Public goods goods or services that are provided for the public most people try to get the benefit without paying for it

9.3.15. Quantity Demanded how much of something that is willing to be paid for given that every other factor is held constant

9.3.16. Quota an official limit on the number or amount of people or things that are allowed

9.4. N-O

9.4.1. Natural monopoly a monopoly that naturally becomes dominated by a single, low-cost producer. these monopolies produce output at a lower average cost per unit than competitive firms could.

9.4.2. Negative Demand Shock when demand for goods and services decreases after a shock example: decline in confidence in the economy that makes people want to save more and consume less.

9.4.3. Negative Marginal Utility When you use so much of a product that it becomes displeasurable

9.4.4. Negative externality something that is beneficial to a third party

9.4.5. Nominal price what a good or service is priced as (which depends on the era. For example: A $1 burger may cost you $5 10 years from now, even if it is the exact same burger.

9.4.6. Nonexcludable a nonexcludable good is a good that's hard to prevent non-payers from consuming the good. (ie: firework show.)

9.4.7. Nonrival a nonrival good is a good that can be used by one person without diminishing its use for another person (ie: firework show)

9.4.8. Normal Goods The goods that you would pay for if you were sufficiently wealthy

9.4.9. Oligopoly only a few firms in an industry in this situation, firms often make deals not to compete against each other so that they can keep prices high and make bigger profits

9.4.10. Opportunity cost In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would be had by taking the second best choice available

9.4.11. Optimal allocation optimal distribution (ie: of labor) that maximizes profit

9.4.12. Ordinal Utility A system of ranking utility without number assignment (I prefer sunsets to brownies, I prefer chocolate to vanilla, etc...)

9.4.13. Own-Price effects The change in quantity demanded relevant only to the individual product itself

9.5. L-M

9.5.1. Laissez Faire a policy or attitude of letting things take their own course, without interfering. synonymous with "pure market" in economics A more moderate, more modern version of laissez faire says that gov should provide the institutional framework necessary for the market economies to function, and then it should get out of the way and let people make and sell whatever is demanded.

9.5.2. Law of demand inverse relationship between price and quantity

9.5.3. Lobbying The process of influencing public and government policy at all levels: federal, state, and local. seek to influence (a politician or public official) on an issue.

9.5.4. Long-Run Shutdown Conditions When a loss-making firm is better off waiting until its fixed-cost commitments have expired before shutting down production. They still make a loss, but they loss less than if they were to shut down immediately.

9.5.5. Macroeconomics studies the economy as a whole concentrates on factors such as interest rates, inflation, unemployment. studies economic growth and how gov try to moderate harm caused by recessions

9.5.6. Mandate an official order or commission to do something. (ie: government mandate)

9.5.7. Marginal Cost Change in total cost / Change in Quantity (of product output) How much total costs increase when you produce one more unit of output. The marginal cost of one more unit of output depends on how much output has already been produced

9.5.8. Marginal Output (Marginal Product) The amount of output or product sold due to variable X Example: If a company has one worker, and he sells 50 products per day, and then you hire a second worker (variable X), and, combined with the first worker, they produce a total of 150 products per day, the second workers MARGINAL OUTPUT is 100 products.

9.5.9. Marginal Utility Incrimental changes in total utility

9.5.10. Marginal cost pricing method of regulating price such that the regulated price is set to where the marginal cost curve crosses the demand curve.

9.5.11. Market a place where buyers and sellers come together to trade money for a good or service (can exist in cyberspace)

9.5.12. Market Failure not providing what people want or providing too much or too little of something

9.5.13. Market Price The price of the product in the market

9.5.14. Market Quantity The amount of a product in the market

9.5.15. Market basket an large, arbitrary collection of goods (used to measure inflation for example)

9.5.16. Market economy almost all economic activity happens in markets; little gov-intervention

9.5.17. Market equilibrium quantity amount of output when quantity supplied = quantity demanded

9.5.18. Market production what happens when one individual offers to make or sell something to another individual at a price agreeable to both

9.5.19. Maximum output the total amount of goods and services produced in the economy when everyone is forced to have a job (and is forced to work as long and hard as humanly possible.)

9.5.20. Microeconomics focuses on individual people and individual business individuals business

9.5.21. Missing market a situation where there is no market for a good or service.

9.5.22. Monetary policy uses changes in the money supply to change interest rates in order to stimulate economic activity. Example: if gov causes interest rates to fall, consumers borrow more money to buy things like houses and cars, thus stimulating economic activity and helping the economy grow faster

9.5.23. Monopolistic competition a sort of hybrid between perfect competition and monopoly.

9.5.24. Monopoly only one firm in an industry; no competition they restrict output in order to drive up prices and inflate profits this hurts consumers and may go on indefinitely unless the gov intervenes

9.6. E-K

9.6.1. Economic Profit Takes into account both the money incurred in the business AND the opportunity costs incurred (the costs or profit that you make in the business RELATIVE to the other alternatives you had...for example, staying at your old job instead of opening a business.)

9.6.2. Economic model mathematical simplification of reality focusing on important variables

9.6.3. Economics science that studies how people and societies make decision that allow them to get the most out of the limited resources.

9.6.4. Elasticity how changing one economic variable affects another Perfectly Elastic Demand When you buy a whole lot of something, or nothing at all. Perfectly Inelastic Demand When you will buy something at any cost.

9.6.5. Equilibrium Price The price of the product in the market

9.6.6. Equilibrium Quantity The amount of a product in the market

9.6.7. Excess Demand When the price is set below the equilibrium price, thus too many consumers want the product, but the producers don't have the supply to meet their demands.

9.6.8. Excess Suplply Allocative efficiency caused by a price that is set too high; consumers are not willing to buy all that is produced

9.6.9. Exchange Rate The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.

9.6.10. Expenditure the money that households pay to firms for goods and services

9.6.11. Externality cost or benefit which affects a party who did not choose to incur that cost or benefit

9.6.12. Factors of production markets money is exchanged to purchase or rend the land, labor, capital and entrepreneurship used in production

9.6.13. Financial markets Financial markets are where people who want to lend money (savers) interact with those who want to borrow money (borrowers). In this market, the supply and demand for loans determine theinterest rate, which is the price you have to pay to get someone to lend you their money for a while. Because most governments run deficits (in other words, they're always in the hole) and have to borrow a lot of money, they're major players in the financial markets.

9.6.14. Fiscal policy using increased gov spending or lower taxes rates to help fight recessions. Example: if gov buys more goods and services, economic activity increases. In a similar fashion, if gov cuts tax rates, consumers end up with higher after-tax incomes, which, when spent, increase economic activity.

9.6.15. Fixed Costs all costs independent of revenue (rent, loans, etc)

9.6.16. Frictional unemployment the duration of unemployment for a person who wants a job (and the person can currently get a job in the economy), but is still searching.

9.6.17. Full employment output (abbreviated as Y*) total amount of goods and services produced in the economy when everyone who want's a job has a job.

9.6.18. Good and service markets people and the government buy the stuff that firms make

9.6.19. Gross domestic product (GDP) value of all goods and serviced produced in a nation's economy in a given period of time, usually a quarter-year or a year

9.6.20. Health economics study of how resources are allocated toward healthcare.

9.6.21. Health finance the study of how healthcare is paid for

9.6.22. Hyperinflation a large inflation ie: increase in price by 20-30% in a month

9.6.23. Keynesianism favoring large government interventions rather than laissez-faire

9.6.24. Inflation rate at which prices increase over time

9.6.25. Inferior Goods The goods that you are forced to pay for due to a lack of wealth, when you would have bought better goods if you were more wealthy

9.6.26. Increasing returns when an amount of return (output) you get for a given amount of input (ie, workers) INCREASES with each successive unit of input. If one worker (input) produces 50 products (output), and the first and second workers combined produces 150 products, and the first, second and third workers combined produce 200 products, note the following: 1st worker = 50 marginal output 2nd worker = 100 marginal output 3rd worker = 50 marginal output It is said that the 2nd worker gives INCREASING RETURNS (an increase of 50) and the 3rd worker gives DIMINISHING RETURNS (decrease of 50 marginal output)

9.6.27. Income the costs (in the form of money) that firms pay for the household's resources (factors of production -- land, labor, and capital)

9.7. C-D

9.7.1. Capital Standard Human-made machines, tools and structures that aren't directly consumed but are used to produce other things that people do directly consume. Examples of "standard"capital Human capital definition High human capital Low human capital

9.7.2. Cardinal Utility A number assignment to utility measurement

9.7.3. Cartel a firm that colludes.

9.7.4. Collude if oligopolies decide to collude, they'll both cut back on production to drive up prices and increase their profits. For producers, collusion is better than competition because it leads to profit that lasts as long as the firms keep colluding.

9.7.5. Command economy all economic activity is directed by the gov

9.7.6. Commodity Something useful that can be turned to commercial or other advantage something that is bought and sold. : something or someone that is useful or valued.

9.7.7. Comparative advantage refers to a country’s ability to produce a particular good with a lower opportunity cost than another country.

9.7.8. Competitive Free Market markets in which numerous buyers freely interact with numerous competitive firms.

9.7.9. Constrained Optimization Problem Maximizing happiness given limited recources.

9.7.10. Consumer surplus the difference between what people actually pay and market equilibrium price (when its in the consumer's favor)

9.7.11. Continuous Good non-discrete units: cooking oil, lemonade, etc.

9.7.12. Cross-Price Effects The phenomena of a price change in one good affecting the quantity demanded of other goods

9.7.13. Dead-weight losses anything that inhibits the market to reach the market equilibrium and produce market quantity.

9.7.14. Demand how much money people are willing and able to pay for

9.7.15. Demand Elasticity how much a the quantity demanded of something changes when the price changes

9.7.16. Depression a really bad recession

9.7.17. Diminishing Marginal Utility The phenomenon of utility decreasing with each successive consumption or use of a product

9.7.18. Diminishing returns when each successive unit of input (ie, labor) brings with it a smaller increase in output than the previous unit of input

9.7.19. Discrete good goods that come in whole quantities (cows, cars, etc)

9.8. A-B

9.8.1. Absolute advantage refers to a country’s ability to produce a certain good more efficiently than another country.

9.8.2. Accounting profit The profit where the only variables are the matters in the business itself.

9.8.3. Actual expenditures expenditures equal to gross domestic product (GDP) (in other words, the actual, descriptive, amount of expenditures)

9.8.4. Allocate To distribute according to a plan; allot To set apart for a special purpose; designate

9.8.5. Allocative Efficiency producing the goods and services that will make people the happiest, and producing them in the correct amounts

9.8.6. Antitrust laws laws that break up monopolies and cartels to promote competition

9.8.7. Asset something durable that isn't directly consumed but gives off a flow of services that you do consume

9.8.8. Asymmetrical information when either the buyer or seller knows more about the quality of a good being negotiated/bargained causes a lot of potentially beneficial economic transactions to never get completed

9.8.9. Average Fixed Costs Fixed cost / Quantity (of product produced) If a lemonade company has one lemonade juicer as their only fixed cost, and it costs $100, then the production cost per lemonade is $2.00 when 50 lemonades are produced, and $0.21 when 470 lemonades are produced.

9.8.10. Average Variable Costs Variable Costs / Quantity (of product produced). For instance, if one worker produces 50 bottles at a variable cost (labor wage) of $80, the average variable cost is $80/50 = $1.60 per bottle. If to workers together cost $160 in variable costs but produce 140 bottles total, the average variable cost is $160/140 = $1.14 per bottle.

9.8.11. Average cost pricing method of regulating price where the price is set to where the average total cost (ATC) intersects the demand curve.

9.8.12. Average total cost Average fixed cost + Average variable cost

9.8.13. Averse selection When you do business with people you would be better off avoiding.

9.8.14. Balanced budrget revenue = expenditures

9.8.15. Beauracracy a system of government in which most of the important decisions are made by state officials rather than by elected representatives.

9.8.16. Breaking Even Revenue equals costs

9.8.17. Budget deficit expenditures > revenue

9.8.18. Budget surplus revenue > expenditures

9.8.19. Business cycle a cycle or recessions and recoveries