Jacob Economics - Week 2

In the third episode, we learned about the different types of economies. There are 3 different types of economies: Communism, Free Market/Capitalist, and Socialistic economies. In a true communistic economy, it is a classless society - a social order where everyone owns the factors of production and output is distributed equally. In a free market, individuals own the factors of production, and government mostly stays out of the equation. A socialistic economy is a mixture of free market and communism. In socialism, there is both private property and some public ownership and control of industry.

We also learned about the Circular Flow Model (as shown on the left.) In this model, everyone sells something to someone else, which in turn ables the next person to sell to the next, so on and so forth until the cycle gets back to the first person, thus creating the cycle.

In the fourth episode, we start to learn about the different types of markets. A market is any place where buyers and sellers meet to exchange goods and services. The key to markets is the concept of voluntary exchange. We also learned about price signals, which are the information markets generate to guide a distribution of resources.

In the space to the right is the supply and demand graph. Line D is the demand curve, and Line S is the supply curve. The Law of Demand states that when the price goes up, people buy less; when the price goes down, people buy more. When supply equals demand, the price is called the equilibrium price and the quantity is called the equilibrium quantity.

In episode five, we learn about macroeconomics. Macroeconomics is the study of the entire economy as a whole rather than individual markets. Macroeconomists make predictions based on data, theoretical models, and historical trends. There are three economic goals of policy makers, to keep the economy growing, limit unemployment, and keep prices stable. The three specific measurements that economists analyze are Gross Domestic Product (GDP), unemployment rate, and the inflation rate. GDP is the value of goods and services produced within a country's border in a specific period of time, usually a year. The unemployment rates represent the number of people that are actively looking for a job. Inflation happens when prices unreasonably go up, and deflation is the opposite.