Summary Of "Economics, Principles And Applications" By Mochón & Becker: UNIVERSITY SUMMARIES

By MAURICIO ENRIQUE FAU

We have summarized the essentials of the following chapters of Mochón and Beker's work: "The Economy Rules Of The Game", "Supply, Demand And The Market", "Elasticity And Its Applications", among others.

• Language: English
• Publisher: BOOKS AND SUMMARIES BY MAURICIO FAU
• Release date: Oct 12, 2021
• ISBN: 9798201378592

MAURICIO ENRIQUE FAU

Mauricio Enrique Fau nació en Buenos Aires en 1965. Se recibió de Licenciado en Ciencia Política en la Universidad de Buenos Aires. Cursó también Derecho en la UBA y Periodismo en la Universidad de Morón. Realizó estudios en FLACSO Argentina. Docente de la UBA y AUTOR DE MÁS DE 3.000 RESÚMENES de Psicología, Sociología, Ciencia Política, Antropología, Derecho, Historia, Epistemología, Lógica, Filosofía, Economía, Semiología, Educación y demás disciplinas de las Ciencias Sociales. Desde 2005 dirige La Bisagra Editorial, especializada en técnicas de estudio y materiales que facilitan la transición desde la escuela secundaria a la universidad. Por intermedio de La Bisagra publicó 38 libros. Participa en diversas ferias del libro, entre ellas la Feria Internacional del Libro de Buenos Aires y la FIL Guadalajara.

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Summary Of Economics, Principles And Applications By Mochón & Becker

UNIVERSITY SUMMARIES

MAURICIO ENRIQUE FAU

Published by BOOKS AND SUMMARIES BY MAURICIO FAU, 2021.

While every precaution has been taken in the preparation of this book, the publisher assumes no responsibility for errors or omissions, or for damages resulting from the use of the information contained herein.

SUMMARY OF ECONOMICS, PRINCIPLES AND APPLICATIONS BY MOCHÓN & BECKER

First edition. October 12, 2021.

Copyright © 2021 MAURICIO ENRIQUE FAU.

ISBN: 979-8201378592

Written by MAURICIO ENRIQUE FAU.

Table of Contents

Title Page

Copyright Page

Summary Of Economics, Principles And Applications By Mochón& Becker (UNIVERSITY SUMMARIES)

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Further Reading: Summary Of Economy And Society By Max Weber

Also By MAURICIO ENRIQUE FAU

About the Author

About the Publisher

CHAPTER 1 THE ECONOMY RULES OF THE GAME

IN STRONG CONTRAST WITH THE EXPOSED HEREIN, IT CAN BE SEEN THAT THE CRITERION OF APPROACHING THESE LAST ECONOMISTS RESTS ON MATHEMATICAL CUTTING BASES. INSTEAD PUT THE AXIS ON THE SOCIAL AND HISTORICAL CHARACTER OF THE ECONOMY

ON THE CONTRARY, THE DEFINITION OF ECONOMY that they offer us is the following: ... economics is the science that studies the most convenient allocation of SCARCE RESOURCES of a society in order to obtain an ordered set of objectives. Regarding Marxist conceptions, it can be observed that an investment takes place, that is, the IDEA TURNS THAT IN CAPITALISM CRISIS HAPPEN BECAUSE THERE IS AN EXCESSIVE GOODS, NOT BECAUSE THERE IS A LACK OF GOODS.

On the other hand, they distinguish between two types of economy: positive, which deals with studying the state of things, that is, what it is. And normative economics, which is what reality should regulate. That is, how things should be in reality.

1.1 The object of the economy game

THE ECONOMY STUDIES HOW TO PRODUCE, DISTRIBUTE AND MANAGE SCARCE RESOURCES IN ORDER TO SATISFY THE NEEDS OF INDIVIDUALS AND SOCIETY. THEREFORE IT IS SAID THAT IT IS THE SCIENCE OF CHOICE: AS GOODS ARE RARE, YOU HAVE TO CHOOSE

NEEDS ARE MATERIAL (food, clothing, house) and not material (education, health, entertainment).

GOODS are all those means that satisfy needs.

TYPES OF GOODS

• FREE (unlimited and available to everyone, for example air) OR ECONOMIC (scarce, are those studied by the economy)

• OF CAPITAL (buildings, factories, machines) OR OF CONSUMPTION (they satisfy needs directly, they can be durable -a refrigerator- or non-durable -a bread-)

• INTERMEDIATE (used as raw material to produce other goods) OR FINAL (used as final consumption)

• EXCLUSIVE (cannot be used by anyone) OR RIVAL (use by one person reduces use by another)

• PUBLIC (not excludable or rival) OR PRIVATE (excludable and rival)

MICROECONOMICS STUDIES THE BEHAVIORS OF INDIVIDUAL ECONOMIC AGENTS, WHILE MACROECONOMICS DESCRIBE GLOBAL OR AGGREGATED BEHAVIORS, THAT IS, LARGE ECONOMIC VARIABLES

Scarcity and choice

THE ECONOMIC PROBLEM OF SHORTAGE IS PRODUCED BY THE COMBINATION OF UNLIMITED HUMAN NEEDS AND LIMITED ECONOMIC RESOURCES

It should be borne in mind that the concept of scarcity is relative: in

Buenos Aires, yesterday a video was a luxury item, not today (today a DVD is). It is also relative to the place: in parts of Africa or the Argentine northwest it is a luxury to have a telephone.

THE CHOICE –THE HAVING TO CHOOSE OR OPT TO SATISFY ONE OR OTHER OF THE UNLIMITED NEEDS- IS A CONSEQUENCE OF THE SHORTCESS –LIMITED RESOURCES-

1.2 The team to play in the economy

1.2.1. Factors and products

PRODUCTIVE FACTORS ARE THE RESOURCES USED IN THE ECONOMY TO PRODUCE GOODS AND SERVICES

LAND (NATURAL RESOURCES)

PRODUCTIVE FACTORS WORK

CAPITAL (buildings, factories, machines,

tools, raw materials)

The land (natural resources)

In economics, LAND is called the land itself (arable or not) and the set of natural resources, such as minerals, water, energy sources, etc. There are RENEWABLE (they can be used repeatedly) and NON-RENEWABLE (exhaustible, like oil).

The job

WORK is the physical, mental and time contribution of individuals for production. And the investment in education and training made to improve job performance is called HUMAN CAPITAL.

Capital

CAPITAL is the set of durable goods that are used to produce other goods and that –in capitalism- is the private property of the capitalist class. Examples of capital are machines, factories, buildings, tools, etc.

The fundamental economic problems of every society

What to produce?

The dilemma is whether to produce a lot or a little, for consumption and investment, of high or low quality, goods or services, etc.

How to produce?

This is about seeing what is going to be used: resources, techniques, people, energy, production methods, type of property, etc.

Who to produce for?

It is about seeing who will consume the production. Whether the income distribution is egalitarian or not plays a key role in this.

1.3 The rules of the game of economics

RULE 1: WE ALL WANT MORE, BUT WE MUST CHOOSE WITH THE RIGHT CRITERIA

Keep in mind that there is always a maximum production limit, which varies according to the resources we have.

THE PRODUCTION POSSIBILITIES FRONTIER (PPF) IS THE MAXIMUM POSSIBLE PRODUCTION OF GOODS AND SERVICES THAT AN ECONOMY CAN PRODUCE WITH THE RESOURCES AND TECHNOLOGY THAT IT HAS, THAT IS, THE MAXIMUM POSSIBLE COMBINATION OF PRODUCTS AND ALL THE GOODS. PRODUCED SERVICES

In an economy that only produces two goods, for example chairs and magazines, if we want to increase the production of chairs, we will have to decrease the production of magazines. Thus, A GREATER PRODUCTION OF A GOOD MEANS A LESS PRODUCTION OF ANOTHER GOOD, which shows what has been stated above, about the fact that economics is the science of choice.

PPF involves various combinations, the most efficient being those in which resources are best used, producing a certain amount of all goods (in the example, it could be half chairs and half magazines).

EFFICIENCY IS OBTAINING THE MAXIMUM RETURN WITH AVAILABLE RESOURCES

RULE 2: FOR ALL ECONOMIC AGENTS THE COST OF A THING IS WHAT IS GIVEN TO GET IT

THE COST OF OPPORTUNITY IS WHAT YOU MUST GIVE UP TO GET OTHER THING

For example, if I go to the pitch to the stalls, maybe I will have to give up going to eat at a restaurant later (which I could go to if I get a popular ticket).

Additional note 1.1

The PPF form and the law of diminishing returns

The most common shape of the FPP is concave.

THE LAW OF DECREASING YIELDS SAYS THAT -IN THE PRODUCTION OF A GOOD- THE SUCCESSIVE AGGREGATE OF UNITS OF A VARIABLE FACTOR -COMBINED WITH FIXED FACTORS- GENERATES AN ADDITIONAL PRODUCT EACH TIME LESS, WHICH LEADS AT SOME TIME TO THE DROP OF PRODUCTION OF THAT VARIABLE INPUT

For example, if we don't add workers to produce chairs, we won't get any new products. If, to a fixed amount of capital, we add a worker (8 hours a day), that is, an additional unit of work, we will obtain 4 more chairs. Adding a second additional unit yields 3 chairs, which go down to 2 with the third unit and 1 with the fourth.

Thus, by adding additional units of labor to a given unit of fixed capital, THE INCREASES IN PRODUCTION OBTAINED ARE EACH TIME PROPORTIONALLY LESS.

This means that THE OPPORTUNITY COST of producing successive units of product (chairs) IS EACH TIME GREATER.

RULE 3: IF WE WANT TO HAVE MORE WITH THE RESOURCES WE HAVE, WE MUST USE SPECIALIZATION AND TRADE

SPECIALIZATION, that is, the CONCENTRATION OF WORK ON SPECIFIC TASKS, ALLOWS TO LOWER PRODUCTION COSTS AND SALE PRICES.

It is for this reason that a plate of noodles is cheaper in a canteen than on a grill.

EXCHANGE through trade ALLOWS SPECIALIZATION, since each producer can sell his surplus and obtain products made by others.

Bartering

TRUEQUE is a transaction in which two people exchange goods. It has several DIFFICULTIES: it takes a long time, it requires finding the person who needs exactly what I have and who has what I need, the indivisibility of some assets, the problem that it brings if many people intervene, etc.

Exchange in an economy with money

In barter, an individual is, forcibly, buyer and seller at the same time, a limitation that disappears with the use of money. Thus, a grocer can hire an electrician, even if he does not need milk. Money also solves the problems of the divisibility of goods and the number of participants involved in bartering.

Specialization and large-scale production

LARGE-SCALE OR MASS PRODUCTION is made possible by specialization and the division of labor (whose limits are given by the size of the market), allowing the number of units of capital per unit of labor to be increased. In this way, with operations that are repeated and with the standardization of production, productivity and efficiency are increased (more and better is produced in less time). Furthermore, AS PRODUCTION INCREASES THE COSTS OF ECONOMIES OF SCALE DECREASE.

Exchange, money and capital

Thus, in modern economies three factors are combined: specialization, use of money and a large amount of capital, all of which increase productivity, that is, the amount of goods and services produced in one hour of work.

RULE 4: FREELY EXCHANGES ON THE MARKETS CONSTITUTE THE WAY IN WHICH ECONOMIC ACTIVITY IS USUALLY BEST ORGANIZED

The ECONOMIC SYSTEM is called the set of relationships, techniques and institutions that are part of the economy of a society.

When social agents act freely, within certain frameworks of institutions, we speak of a MARKET ECONOMY. On the other hand, when there is a central authority that makes the fundamental decisions, we have a CENTRAL PLANNING system.

In most economies of our time, markets and government share decisions.

The market mechanism

MARKET MECHANISM is called the set of markets that are part of an economy. What, how and for whom it is produced, distributed and consumed are decisions made by the markets, without anyone in particular planning it.

RULE 5: THE PUBLIC SECTOR CAN SOMETIMES CORRECT AND IMPROVE THE WAY IN WHICH MARKETS WORK

According to Mochón and Beker, the market economy is the most efficient and free economic system. However, the MARKET ECONOMY has some LIMITATIONS: a) UNFAIR DISTRIBUTION of income, b) IMPERFECT COMPETITION (monopolies, oligopolies, etc.), c) EXTERNAL EFFECTS (for example, environmental degradation), d) PUBLIC GOODS THAT INTERFERE IN the free market (for example, defense spending), since no cost can be assigned to its use, e) in addition, common goods or resources are depleted (for example, public lands due to excessive use), f) INFORMATION IMPERFECT, g) INSTABILITY (periodic crises that force State intervention).

MARKET FAILURES ARISE WHEN A MARKET DOES NOT EFFICIENTLY MANAGE ITS RESOURCES BY ITSELF

THE MOST COMMON THING IS THAT WE FIND MIXED ECONOMIES, WHERE THE MARKET AND A STATE THAT REGULATES AND CORRECTS IT

RULE 6: THE AGENTS THAT ACT IN THE ECONOMY RESPOND IN THEIR BEHAVIOR TO THE INCENTIVES PRESENTED TO THEM

Economic agents respond to incentives: the entrepreneur produces what is in demand, invests more if threatened by competition, etc. In planned economies, these incentives do not exist, which, according to Mochón and Beker, would explain their failure.

RULE 7: TO UNDERSTAND THE ECONOMY, YOU MUST KNOW THE WAY IN WHICH ECONOMISTS PERFORM THEIR ANALYSIS

A THEORY IS A POSSIBLE EXPLANATION –WITH DEFINITIONS AND HYPOTHESIS- ABOUT THE FUNCTIONING THAT UNDERLINES OBSERVABLE PHENOMENA

Theories state that there are certain relationships between two or more variables, with the aim of predicting their behaviors. For example, the issuance of currency (variable) produces inflation (variable). In Economics, a VARIABLE describes the behavior and results of economic decisions.

Acceptance and refutation of a theory

When one theory better predicts the results of the relationships between variables, this second theory should be discarded.

The role of assumptions

An ASSUMPTION is a proposition that is taken to be true. For example, one of the most used assumptions in economics is that economic agents act rationally and utilitarian, maximizing their income, making the most of it.

A theory will be better, not by its assumptions but by the quality of its predictions.

Economic research

All ECONOMIC RESEARCH has three PHASES: 1- OBSERVATION AND ANALYSIS of a phenomenon and its