ECON1010 Lecture Notes - Lecture 1: Maurice Obstfeld, Opportunity Cost, Marginal Utility
Lecture 1
Microeconomics is concerned with particular markets and segments of the economy, while macroeconomics
is the study of the whole economy.
- Economics has the potential to improve peoples eeryday lies – Maurice Obstfeld (20080
ROLE OF AN ECONMIST
- Extremely influential to direct policy (carbon tax, interest rates etc)
- Use models to make predictions and identify trends within data that include economic variables (such
as GDP)
- Create insights based on their analysis informs decision making
Advantages of using economic data and thinking like an economist –
- Sound economic judgement can enhance your own decision making capability
- Knowing how the economic policy works
Economic Efficiency – To get the job done with the least amount of resources.
- The property of society getting the most it can from its scarce resources
o Minimizing waste – using resources wisely
Equity – Distriutio of eooi resoures i a ay thats see as fair
- Fairness
o Subjective
o Equity is normative
▪ Allocating resources to clos ethe gap between rich and poor in society
Trade off – what you give up when you receive something
- Sacrifice something to gain something
- Give up time, give up money
**OFTEN TALK ABOUT THE TRADE-OFF BETWEEN EQUITY AND EFFICIENCY
there is o suh thig as a free luh
Opportunity Cost – whatever must be given up to obtain some item
1. Costs of what you chose
2. ost of the trade off (next best alternative)
a. What did you trade off to be here a uni
i. Work full time instead of being at uni full time
1. Financial benefits you gave up from not working full time
2. Other benefits you gave up – non financial aspects (skills, experience,
knowledge of industry, network connections)
**use definition from chapter 13
Economic Models – simplified version of reality that enables economist to learn about the world
Macroeconomics – The study of economy -wide phenomena inclusing inflation, unemployment and economic
growth
CHAPTER 1 – BASIC ECONOMICS PRINCIPELS: SCARCITY
Learning Objectives:
find more resources at oneclass.com
find more resources at oneclass.com
ALLOCATION OF SCARCE RESOURCES
Scarcity refers to the limited nature of societys resoures
- Levels of societys resoures
o Natural resources
o Capital (physical and human)
o Labour (how we allocate our time)
o In a market economy add entrepreneurship
- We encounter scarcity in every decision we make
- Society must allocate what jobs will be done by who, as well as the goods and services that are
produced
- Scarcity exists at individual level, firm level, government level, societal level
- Management of resources is important as we cant produce all goods and services that are wanted
o Hence why economic decisions need to be made
o Economics is a social science about decision making in the face of constraint (scarcity
constraint)
Economics is the study of how society manages its scarce resources
- Helps people understand the production, consumption and transfer of wealth
Resources are allocated through the combined choices of millions of households and firms
- Forces of demands and supply
- Price signals guide decision making
- Economists study how people make decisions & how they interact with one another
o Examine how buyers and sellers interact to determine the price and quantity at which the
good is sold
o Consider how behavior is impacted when incentives people face change
TRADE OFFS (OPPORTUNITY COST) – MEANING OF OPPORTUNITY COST
Opportunity Cost is the best alternative that must be given up to obtain some items
- Opp. Cost = what you give up compared to what you gain
o Opportunity cost → benefit
- Subjective to each individual
- Decisions require comparing costs & benefits of alternatives
o Whether to go to lectures or sleep in
The opportunity cost of an item is what you give up to obtain that item
• Allocation of scarce resources
• Trade-offs (opportunity cost)
• Meaning of opportunity cost
• Decision making at the margin
• Role of incentives in influencing behaviour
• Benefits of trade
• Markets as a form of economic system to make key economic decisions
• Identifying trends from data
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Microeconomics is concerned with particular markets and segments of the economy, while macroeconomics is the study of the whole economy. (cid:862)economics has the potential to improve peoples(cid:859) e(cid:448)eryday li(cid:448)es(cid:863) maurice obstfeld (20080. Extremely influential to direct policy (carbon tax, interest rates etc) Use models to make predictions and identify trends within data that include economic variables (such as gdp) Create insights based on their analysis informs decision making. Advantages of using economic data and thinking like an economist . Sound economic judgement can enhance your own decision making capability. Economic efficiency to get the job done with the least amount of resources. The property of society getting the most it can from its scarce resources: minimizing waste using resources wisely. Equity distri(cid:271)utio(cid:374) of e(cid:272)o(cid:374)o(cid:373)i(cid:272) resour(cid:272)es i(cid:374) a (cid:449)ay that(cid:859)s see(cid:374) as fair. Trade off what you give up when you receive something: allocating resources to clos ethe gap between rich and poor in society.
