Introduces the fundamental concepts of economics, including scarcity, opportunity cost, and the necessity of choices in resource allocation. It covers the basics of supply and demand, the Production Possibilities Curve (PPC), and comparative advantage, laying the groundwork for understanding how in...
What is the economy?
- Study of Scarcity of resources
- We have unlimited wants but limited resources.
- We must make choices on how we will use our resources.
- Economics is the study of choice.
Microeconomics vs Macroeconomics:
- Micro: small [individual, individual markets etc…chick-fil-a and more] (dealing with
individual company)study of small economic units
- Macro: Large scale [inflation, economic growth, unemployment,what can government
do? ]study the economy as a whole.
How is the economy used?
- Economists use scientific methods to make generalizations and abstractions to
develop theories. This istheoretical economics.
- These theories are applied to fix problems or meet economic goals. This is called
policy economics.
Positive vs Normative:
- Based on facts. Avoid value judgments. [WHAT IS] {measurable}
Ex: Rise in avg temp will likely increase demand for sunscreen products.
- Includes value judgements [what ought to be] {not measurable}
Ex: Pollution is the most serious economic problem.
5 economic assumptions:
- Scarcity: Society has limited resources and unlimitedwants.
- Trade-off:Choices must be made [scarcity]. Everychoice has a cost.
- Self-interest: Everyone’s goal is to maximize theirsatisfaction.
- Marginal [additional] costs and Marginal benefits [additional]:everyone makes
decisions by comparing every choice.
- Simplified model:real life situations can be explainedand analyzed through
simplified graphs and models.
pportunity cost:Most desirable alternative givenup when you make a choice.{money or
O
benefits lost by not selecting a particular option during the decision-making process.}
Trade-offs: ALL the alternatives that we give upwhen we make a choice.
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