ECO101H1 Lecture Notes - Inferior Good, Normal Good, Opportunity Cost
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ECO 100Y1- LA #1- First Principles
1) Some First Concepts
a) What is Economics all about?
- Economics is about limited resources and how they are utilized to satisfy what you and I
want (Consumers & Household)
- Resources are scarce, because of that, we have to use it wisely to satisfy the demands
- Types of Resources (Inputs)
1) Natural (LAND)
2) Human (LABOUR)
3) Capital – aid in production
- Production- all about Inputs (Factors of Production) into -> Outputs – Commodities –
Goods/Services
- Outputs- is commodities which can be used as goods and/or services
b) Big Economic Questions
1) WHAT? (What will be provided)
2) HOW? (How will they be produced)
3) FOR WHOM? (who gets what’s produced)
** Sometimes there will be questions such as WHEN? (Differs between seasons) and WHERE? (Where
natural resources are)
^ - the model answers individual questions for Goods and Services
c) Growth
- Growth would be asking yourself – is the total getting bigger/larger?
- Unemployment?
- Price Economy- what’s happening to the price level- Inflation/Deflation
- How does everything affects growth
d) MICROECONOMICS vs. MACROECONOMICS
a) Micro-economic- study of individual (individual market) decisions by firms & Consumers
- Well represent the supplier and demander relationship
- Determination of the price & Quantity
b) Macro-economic- determines the average price
- calculates the output of the country
- Decision- making of the entire economy
e) Market-Based Economic System
a. Allow consumers to decides
b. Consumer demand
c. Limited Government Involvement
d. Buyers& sellers interact
e. Solution where buyer and seller agrees is the equilibrium
f. Firms earn revenue from consumers then buy inputs
g. Individual questions answer micro questions
h. Micro questions- results of adding all the values of all things is produces and calculate its
average
i. Market for all input side
j. Market for all commodities
k. $$ money is the key mechanism to buy & sell
2) First Example of Economic Model
a) Production Possibility Curve (PPC)
- Scarcity at Macro-level
- 1st economic model
- We imagine a world that can only (with Given Technology) produce 2 goods – guns & Butter
(Military & Civilians)
- Constant transformation rate
- Given technology –fixed inputs can be used to make outputs- max amount of each
Max Guns= 5M Crates
Max Butter= 10M Cases