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income $120 plb = $10 plb = $20 plb = $20
=
Plb =
$10
purchase power
PPC
5 production possibility curve : displays the different
a combinations of goods/services that society can
si produce in a
fully employed economy , assuming
BC3
3 BCI
=
fixed
a
availability of supplies of resources
BC4
BC fixed
e tech.
Yz efficient .C D
A B
BOOKS
:
,
inefficient : E
cars & 600 TOO 1 , 006 Feasible : A B C, D E,
, ,
Computers 3000 2200 2000 & cars infeasible : F
A
⑧ F
opportunity cost :
What you 1000 -
B
give up for
something else 700 ·
%
& give up one good for another
-
cars from 600 to 700 ? 200 computers
-
computers from 2000 to 3000 ? 700
=2009DComputer
from O to 2200 ? 600 a
computers
-
Wastefull 2000
-
cars from 600 to 1000 ? 2200
,CHAPTER I
economics : Social science concerned wh how individuals ,
institutions and society
make best choices under conditions of
scarcity
economic perspective viewpoint envisions individual institutions
: a that e making
rational decisions by comparing the marginal benefitse marginal costs
associated with their actions
SCARCITY AND CHOICE
Scarcity : limits placed on options and demands Choice ,
as a result of being
limited economic resources
the core of economics is the idea that "there is no free lunch " maybe
For me but not for the restaurant
scarcity plays a role bi society sacrificed the goods/services
to make the restaurant instead of
something else
Opportunity costs : the amount of other products that must be foregone or
sacrificed to produce a unit of product
C3 PURPOSEFUL BEHAVIOR
·
Fb Spends over Econ assumes that human behavior reflects
#) 20 billion every "rational self-interest"
year ,
but doesn't
Utility :
the pleasure , happiness , or satisfaction obtained
charge users . From
consuming
a
good/service
Fb charges ↳ they allocate their time,
energy ,
and money to maximize
advertisers e their satisfaction
purposeful behavior : people make decisions
they pay $40
billion per year
~ some desired outcome
marginal analysis : the comparison between extra benefits e extra costs
usually
,
for decision making
tra
an opportunity cost -
the value of the next best thing
given is always present choice
up in every
-
, THEORIES/ PRINCIPLES
scientific method : the procedure for the systematic pursuit of knowledge involving
the observation of facts and the formulation and
testing of hypothesis to
obtain theories , principles ,
and laws aka economics theory
economic principle : a widely accepting generalization about the economic behavior
Of individuals or institutions
theories ,
principles , and models are "purposeful simplifications"
economist remove clutter and simplify to create theories
good theories do a
good job of explaining/predicting how ppl behave
& ce-quantity
"
Other-things-equal assumption : the assumption that factors other
buy when than those being considered are held constant -
Aka
(eriss) assumption
MICRO ECONOMICS
microeconomics : concerned w 1 decision making by individual units such as households, a firm ,
or an
industry and 2 individual markets
,
Specific goods/services , e product and resource prices
↳ under microscope
MACROECONOMICS
and behavior
macroeconomics : examines the performance of economy as a whole
Focuses Econ business cycle interest rates inflation , behavior of
on growth , , ,
e
major economic aggregates >
-
gov . household ,
and business sectors
Aggregate : a collection of specific economic units treated as if they were one unit
POSITIVE NORMATIVE ECONOMIES
and cause-and-effect relationships
positive economies : Focuses on fac ts
↳ avoids judgement What is" ↳ scientific
↳ statement
normative economies : incorporates value judgements about what the
economy should
be like or what policies should be recommended
"Should
"
W hat
↳ be
economizing problem : the need to m a ke choices blC economic wants exceed economic means
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