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EC120 Lecture 1 on Principles of Economics

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Hideki Ariizumi

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EC120-SECTIONA-MICROECONOMICS Hideki Ariizumi Office -P3034 Ext - 2277 [email protected] Office hours: Tuesday/Thursday 10:00am-11:20am -------------------------------------------------------------------------------------------------------------------- - DAY 1 - TUESDAY SEPT 10 What is economics all about? Economics- the study of how society manages its scarce resources, e.g. • how people decide what to buy, how much to work/save/spend • how firms decide how much to produce, how many workers to hire • how society decides how to divide its resources between different needs Scarcity - the key issue, the limited nature of society’s resources Principles: 1. Decision Making: People face trade-offs *Trade-off - people must make decisions, taking into consideration what they are giving up by making that decision Society’s important trade-off - efficiencyvs.equality Efficiency - when society gets the most from its resources Equality - when prosperity is distributed uniformly among society’s members Society’s trade-off - to achieve greater equality, could redistribute income from wealthy to poor, but this reduces incentive to work and produce, shrinks the size of “economic pie” Ex. equality by raising taxes for the wealthy - they won’t be as motivated to continue to prosper 2. Decision Making: The cost of something is what you give up to get it *Opportunitycost - the amount that could've been gained by choosing an option's best alternative - does not just consider dollar values, but also the value of time, results, etc. Ex. choice of coming to university, opportunity cost
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