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ECON 1050
Diana Alessandrini

ECON Jan.8/13 Definition Economics- The social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. Social sciences- -It’s not just about making money -it is the study of human behaviour given the scarcity problem -SCARCITY- we always want more than we can get -everyone faces scarcity, even bill gates Scarcity- What you can afford to buy is limited by your income, prices and time -what governments can afford is limited by taxes they collect -what society can get is limited by resources available Incentives- -scarcity forces us to make choices over available alternatives -choices depend on incentives -prices act as incentives Economics is divided into: Microeconomics- the study of choices that individuals and businesses make, the way those choices interact in markets and the influence of governments Macroeconomics- the study of the performance of the national and global economies Two big economic questions: 1. What to produce? -How do choices end up determining what, how, and for whom goods and services get produced? -Goods and services are the objects that people value and produce to satisfy human wants Consider this: owner of a piece of land can decide to use it to grow corn or he/she can sell it and use the money to open a new business What to produce- this changes over time 2. Are choices made in social interest? -do we produce the right things in the right quantities -do we use our factors in the best possible way? -People make choices they think are best for them - choices are made in self interest -choices that are best for society as a whole are said to be in social interest Globalization- Nike produces sport shoes in Malaysia Information revolution- Microsoft and Intel Gas emissions- affect others and the environment (choices made based on self-interest) Jan.10/13 The economic problem - Productions possibilities frontier: boundary between those combinations of goods and services that can be produced and that cannot be produced -To illustrate the PPF, we focus on two goods at a time and hold the quantities of all other goods and services -We look at a model economy in which everything remains the same except the goods were considering Production efficiency we cannot produce more of one good without producing less of some other good Trade off along the PPF- every choice along the PPF involves a trade-off. Given scarcity, if we produce one thing, we cannot produce something else. Examples… time studying vs. facebook in 1 hour Opportunity cost- the PPF allows us to compute costs. The opportunity cost of an action is the highest value alternative that must be given up. (Opportunity cost ≠ money cost) All points along the PPF are efficient but which point is best? To determine which of the alternative efficient quantities to produce, we compare costs and benefits. Marginal costs- opportunity cost of producing one more unit, this can be derived from the PPF Marginal benefit of a good of service- the benefit that we receive from producing one more unit of that good It ultimately depends on peoples preferences; it is measured by the amount that a person is willing to pay for an additional unit -Can we expand the PPF? Technological change Capital accumulation Jan. 17/12 Summary from Last class -relative price -quantity demand vs. demand -demand curve = marginal benefit curve -movement along the demand curve vs. shi
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