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ECON 101 NOTES: Introduction to economics

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University of Alberta
Alexander Gainer

INTRODUCTION TO ECONOMICS TEN PRINCIPLES OF ECONOMICS 1. TRADEOFFS - People have to make decisions between things like money and time - Ex. If you spend 5 hours working, in those 5 hours you could be playing games or hanging out with friends 2. COST IS WHAT YOU GIVE UP - Takes into account monetary costs and opportunity costs - Monetary costs- Price (Something costs you $5) - Opportunity costs- The second best option (Ex. The cost of university is approximately $10,000 for you for a year. In the year you could be working a part time job that makes $15,000 a year, and this would be your opportunity cost) 3. RATIONAL PEOPLE THINK AT THE MARGIN - People try their best to achieve their objectives & not lose their money - Considers the costs and benefits of marginal changes (incremental adjustments) 4. RESPONSE TO INCENTIVES - People often respond to incentives - Motivation for people - Ex. If the price of a type of cereal goes up, you might want to switch brands to save money 5. TRADE - Trade happens across the world, and sometimes trade makes it cheaper to buy things 6. MARKETS - Markets organize economic activity (what and how much to produce) - Price system and the invisible hand - Interaction between buyer and seller determine price 7. GOVERNMENT INVOLVEMENT - Governments enforce rights (through laws) - If there is no laws to protect rights, people will have less ambition to work 8. STANDARD OF LIVING - Measure of how well off a person is - Country’s ability to produce goods and services (productivity) 9. PRICES AND INFLATION - Inflation- printing too much money, causes the value of money to decrease 10. SOCIETY FACES SHORT-RUN TRADEOFFS BETWEEN UNEMPLOYMENT AND INFLATION - Have to decide between unemployment or inflation ECONOMISTS - Two types of roles of economists 1. Scientist- one who explores how the world works - Objective view - Facts Ex. “Inflation lowers the value of money.” 2. Policy ad
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