Micro Chap 1

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bwood190
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260416
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Micro Chap 1
Updated:
2014-02-05 15:24:17
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Microeconomics Chapter
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Micro
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  1. Scarcity
    inability to get what we want
  2. Economics
    study of choices that individuals, businesses, govts, and societies make as they cope w/ scarcity and incentive
  3. Incentive
    reward to encourage action, penalty, or discourage action
  4. Microeconomics
    • study of choices that individuals, businesses, make and the way those choices interact in mkts and influence gov
    • eg. why ebook over hard copy?
  5. Macroeconomics
    • performance of national economy and global economy
    • eg. why are employment rates so high?
  6. Goods
    • physical objects
    • eg. cell phone
  7. Services
    • tasks performed for people
    • eg. cell service
  8. Factors of Production
    • 4 main categories
    • 1. Land - natural resource, "gifts of nature"
    • 2. Labour - work effort devoted to produce goods. Qualtiy depends on human capital
    • 3. Capital - tools, buildings, instrument, things used to produce goods and services
    • 4. Entrepreneurship - human resource to organize labour, land and capital
  9. Human Capital
    knowledge obtained through education, training and work experience
  10. Capital
    • tools, buildings, instruments
    • things used to produce goods and services
  11. Self interest
    • choice is best one available for me
    • eg. how I use my time
  12. Social interest
    • choice leads to an outcome that is good for society
    • has 2 dimensions
    • 1. efficiency - resources used to produce goods at lowest cost possible and in quantities that benefit most amount of people
    • 2. Equity - is it fair for everyone?
  13. Efficiency
    Produce resources at lowest possible cost and in quantities that benefit most people possible
  14. Equity
    is it fair? no real definition
  15. Self interest and social interest (4 things)
    • 1. Globalization
    • 2. Info age economy
    • 3. Climate change
    • 4. Economic Instability
  16. Globalization
    • expansion of international trade and investment
    • in self interest of consumers who can buy low cost goods and services produced elsewhere
    • self interest of firms who manufacture for cheap sell for high price
  17. Information age economy
    • tech change in last 40 years = info revolution
    • consumers can access info, firms make money
  18. climate change
    should gov change self interest and try to help people be more green?
  19. Economic Instability
    • banks lending and buying is self or social interest?
    • bailouts made to self interest companies, serve social interest?
  20. Economic Way of Thinking (6 ways)
    • 1. Choice is a tradeoff
    • 2. Making rational choice
    • 3. Benefit
    • 4. Cost
    • 5. How much?
    • 6.Choices and incentives
  21. 1. Choice is a tradeoff
    • choice selected from alternatives
    • Tradeoff is an exchange, give up something to get something
  22. Tradeoff
    an exchange, give up something to get something
  23. 2. Making Rational Choice
    compare costs and benefits, achieve high benefit at low cost
  24. 3. Benefit
    • What you gain.
    • Based on preferences likes and dislikes
    • Economists measure benefits based on how much you are willing to give up for something
  25. Preferences
    likes and dislikes
  26. 4. Cost
    • what is given up?
    • Opportunity Cost - highest valued alternative given up to get something
    • eg. when in school. Time, $, job are cost of being a student
  27. Opportunity Cost
    highest valued alternative given up to get somethingeg. when in school. Time, $, job are cost of being a student
  28. 5. How much?
    • choosing margin - choice made by comparing a little more of something w/ its cost. eg. text friends or study.
    • Marginal Benefit - increase in activity and how much benefit is gained. eg. more study, better grades.
    • Marginal Cost - opp. cost of an increase in activity. eg. more study, less time w/ friends
  29. Margin
    choice made by comparing a little more of something w/ its cost. eg. text friends or study.
  30. Marginal Benefit
    increase in activity and how much benefit is gained. eg. more study, better grade
  31. Marginal Cost
    opp. cost of an increase in activity. eg. more study, less time w/ friends
  32. 6. Choices and incentives
    • everyone pursues self interest, not selfish, just how to use resources
    • self interested act gets me benefits based on my view
    • people do things when marginal benefit exceeds marginal cost, reject when cost is higher than benefit
    • eg. teacher gives problem that will be on test, and one that will never be seen again.
  33. Positive Statement
    can be checked against facts
  34. Normative Statement
    based on opinions and how things should be
  35. Economic Model
    description of some aspect of economic world that includes only features of the world that are needed for the purpose at hand

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