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ECON 1BB3 Lecture Notes - Opportunity Cost, Scientific Method, Autarky

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Bridget O' Shaughnessy

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Day 1 Notes: Monday January 7th, 2013
10 Principles of Economics:
1. People face tradeoffs
2. The cost of something is what you give up to get it
(Opportunity cost)
3. Rational people think at the margin
(Cost/benefit, forward-looking)
4. People respond to incentives
(Change behavior)
5. Trade can make everyone better off
6. Markets tend to increase efficiency
(Efficiency: How much stuff can we make?)
7. Sometimes the government can eliminate market inefficiencies
8. A country’s standard of living depends on its productivity
9. Prices increase when the government prints too much money
10. There is a short-run tradeoff between inflation and unemployment
Day 2 Notes: Tuesday January 8th, 2013
What is more dangerous, a gun or a swimming pool?
1. Why is economics difficult?
-Express ideas in economics
a) English language (Ex. People buy less coffee when the price rises)
b) Algebra / equations (Ex. Quantity Demanded = 100 0.30 Pc)
c) Diagram / graph
-Translate between each different form of communication
2. Economics is a social science
-Social = people
-Science = use scientific method
-> Observe
-> Theorize
-> Test Theory (Repeat Theorize for new results)
3. Microeconomics versus Macroeconomics
Microeconomics: individual households and firms and how they interact
Macroeconomics: Economy-wide phenomena such as interest rates,
unemployment, money, and growth
4. Efficiency versus Equity
-Efficiency is the size of the pie
-Equity is how the pie is divided
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