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ECON101 Fall 2013

15 Pages

Course Code
ECON 101
Shadab Qaiser

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Return to University Notes indexECON101MicroeconomicsSection 008InstructorName Shadab QaiserOffice HH104Office Hours Tuesdays Thurdays at 600PM700PM or by appointmentEmails2qaiseruwaterlooca put Econ 101 and full name in subjectTA Greg12913EconomicsEconomyone who manages a householdEconomics is the study of how society manages scarce resources Society has limited resources and cant produce all the goods andservices everyone wishes to have Economics is a social scienceScarcity is the inability to satisfy all of our wants Economics studies the choices that we make in the face of scarcity These choices areinfluenced by incentivesAn incentive is a reward that encourages an action or a penalty that discourages an action An incentive pushes people to act in acertain way A disincentive is another word for a negative incentiveThere are two main parts to economicsMicroeconomics the study of the individual part of the economyhow individuals and entities make decisions and how they actindividually It studies the choices and the interactions and influence of these choicesMacroeconomics the study of the performance of economies on the large scale It studies phenomena such as inflationunemployment and growthResources are anything that can be used to produce something else Resources are scarce This may include life land labourbuildings machines etcThe big questions of economics are what to produce how to produce it and for whom to produce individuals deal with economicactionsMicroeconomicsWho will workWhat and how much goods should be producedWhat resources are needed in productionWhat price should goods be sold atThese questions are dealt with in the field of microeconomicsGoods and services are the things that people value and produce to satisfy needs and wantsCanadian productionAgriculture 1Manufactured goods 20Services 80Chinese productionAgriculture 10Manufactured goods 50Services 40Factors of production are the resources needed to produce goods and services These include land labour capital entrepreneurshipLand is a general term that refers to factors of production taken from nature such as real estate water or raw materials It meansnatural resources in economic contextsLabour is the work time and work effort that people devote to producing goods and services The quality of labour depends onhuman capitalthe knowledge and skill people have Human capital is created through education training and experienceCapital are the tools instruments machines buildings etc used to produce goods and servicesEntrepreneurship is the human resource organizing land labour and capitalLand earns rent Labour earns wages Capital earns interest Entrepreneurship earns profitIt is helpful and reasonably accurate to assume that people make choices in their own selfinterestchoices that people believe arebest for themHowever this does not always holdpeople can often be irrational or act in a way contrary to self interest due to psychological factorssuch as mental capacity and willpowerThe goal is to have everyone make choices in the social interestchoices that are best for society as a whole This is the case if it usesresources efficiently and distributes goods and services fairlyAdam Smiths Invisible Hand phenomenon in which economic agents acting purely out of selfinterest also promote social interestIt is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but from their regard totheir own interestAdam Smith regarded as the father of economicsSometimes conflicts can occur between selfinterest and social interestGlobalization outsourcing jobs to the lowest common denominatorInformationage economies nonphysical resources make regulation difficultGlobal warming and environmental concerns profit over pollutionRunning out of natural resources natural resource exploitationEconomic instability stabilization of economy is difficultScarcityScarcity requires choices and choices require tradeoffsgiving up certain things to get othersCanada is a labourscarce country Therefore the economy favours production with less labour and more of other things such ascapitalWhat how and for whom What do we spend resources on How do we produce goods and services with our resources For whomdo we produce forTradeoffs in what to produce arise when people businesses or governments choose how to spend money or what to produceTradeoffs in how to produce arise when businesses choose between different means of productionTradeoffs in for whom to produce arise when there are choices that affect individual buying powerThe big tradeoff equality vs efficiency Efficiency is the ability to get the most possible out of its scarce resources Equality or
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