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Lecture

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


Department
Economics
Course Code
ECON 1BB3
Professor
Bridget O' Shaughnessy

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Day 1 Notes: Monday January 7th, 2013
10 Principles of Economics:
HOW PEOPLE MAKE DECISIONS
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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