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Chapter 1: What is Economics?

3 Pages

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ECON 101
Fiona Rahman

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Chapter 1: What Is Economics? - economics questions/problems arise because we want more than we can get - scarcity = the inability to satisfy our wants - scarcity leads to choice, and we make choices depending on the incentives - incentive = reward/penalty that encourages/discourages an action Economics = social science that studies the choices that individuals, businesses, governments and societies make as they cope with scarcity, and the incentives that influence and reconcile those choices - divides into: - microeconomics = study of individuals and businesses - choices that they make - how those choices interact in market - the influence of government - macroeconomics = study of performance of national and global economics Two Big Economics Questions 1. How do choices affect what, how, and for whom goods and services are produced? - goods and services = objects people value and produce to satisfy wants - What: What is produced? How many of it? - How: How to use factors of production? Factors of production (FOP) = resources used to produce goods and services a. land = any natural resources (land, oil etc.) b. labour = workers' time and effort c. capital = knowledge and skill of workers (determine quality of labour) d. entrepreneurship = people who organizes land, labour and capital (CEO, human resources department etc.) - For whom: who gets the goods and services? Depends on incomes. - higher income, more good and services - types of income: a. land: rent b. labour: wage c. capital: interest d. entrepreneurship: profit 2. When do choices made in the pursuit of self-interest also promote the social-interest? Can they? - self-interest = best for an individual - social interest = best for society as a whole a. efficiency = when resources are used at the lowest possible price and in quantities that give the greatest benefits b. equity = fairness (subjective) - main topics: - globalization = expansion of international trade, borrowing/lending, and investment - good for consumers (lower prize), and for big companies (lower cost) - bad for low-wage worker and companies in high-prize countries (can't compete) - does it serve social interest? - the information-age economy - the past 40 years has been a Information Revolution - serve self-interest of consumers (products), of technological companies and their CEOs ($) - did it serve the social interest? - global warming/climate change = actions t
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