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inability to get what we want
study of choices that individuals, businesses, govts, and societies make as they cope w/ scarcity and incentive
reward to encourage action, penalty, or discourage action
- study of choices that individuals, businesses, make and the way those choices interact in mkts and influence gov
- eg. why ebook over hard copy?
- performance of national economy and global economy
- eg. why are employment rates so high?
- physical objects
- eg. cell phone
- tasks performed for people
- eg. cell service
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
knowledge obtained through education, training and work experience
- tools, buildings, instruments
- things used to produce goods and services
- choice is best one available for me
- eg. how I use my time
- 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?
Produce resources at lowest possible cost and in quantities that benefit most people possible
is it fair? no real definition
Self interest and social interest (4 things)
- 1. Globalization
- 2. Info age economy
- 3. Climate change
- 4. Economic Instability
- 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
Information age economy
- tech change in last 40 years = info revolution
- consumers can access info, firms make money
should gov change self interest and try to help people be more green?
- banks lending and buying is self or social interest?
- bailouts made to self interest companies, serve social interest?
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
1. Choice is a tradeoff
- choice selected from alternatives
- Tradeoff is an exchange, give up something to get something
an exchange, give up something to get something
2. Making Rational Choice
compare costs and benefits, achieve high benefit at low cost
- What you gain.
- Based on preferences likes and dislikes
- Economists measure benefits based on how much you are willing to give up for something
likes and dislikes
- 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
highest valued alternative given up to get somethingeg. when in school. Time, $, job are cost of being a student
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
choice made by comparing a little more of something w/ its cost. eg. text friends or study.
increase in activity and how much benefit is gained. eg. more study, better grade
opp. cost of an increase in activity. eg. more study, less time w/ friends
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.
can be checked against facts
based on opinions and how things should be
description of some aspect of economic world that includes only features of the world that are needed for the purpose at hand