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Econ 1.docx

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ECON 1000
George Georgopoulos

Ch. 1: Definition of Economics  Economics: the social science that studies the choice individuals, businesses, governments, and entire societies make as they cope with scarcity and he incentives that influence and reconcile those choices  Scarcity: inability to satisfy all wants/needs because of limited resource  Incentive: a reward that encourages an action or a penalty that discourages an action  Microeconomics: the study of the choices that individuals and businesses make, the way these choices interact in markets and influence the government  Macroeconomics: the study of the performance of the national economy and the global economy o Microeconomics vs. Macroeconomics: no money involved in microeconomics  Two big economics questions o How do choices end up determining what, how, and for whom goods and services get produced? o When do choices made in the pursuit of self-interest also promote the social interest?  Factors of production o Land: earns rent  Natural resources: minerals, oil, gas, coal, water, air, forests, fish, etc.  some renewable (can be recycled), some non-renewable (resources to make energy) o Labour: earns wages  work, time and effort that people devote to production goods and services  physical and mental efforts  quality depends on human capital (knowledge and skill that people obtain from education, training, and experience) o Capital: earns interest  tools, instruments, machines, buildings used to produce goods and services  financial capital used to buy physical capital, but is not a productive resource as it is not used to produce goods and services o Entrepreneurship: earns profit  human resources that organize labour, land and capital  Self-interest: if the choice is the best available for an individual. Using time and resources in ways that make sense to an individual. Don't think how choices affect society.  Social interest: self-interested choices promote social interest if they lead to an outcome that is the best for society as a whole. An outcome that uses resources efficiently and distributes goods and services equitably among individuals o used efficiently when goods and services produced:  at lowest possible cost  in quantities that give the greatest possible benefit  interaction of self-interest and social interest o Globalization  expansion of international trade, borrowing, lending , ad investment o The information-age economy  technological change of the 1990s and 2000s o Global warming  climate change and political issues associated o Natural resource depletion
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