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Lecture

ECOn 1000 Week 1.docx

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Department
Economics
Course
ECON 1000
Professor
George Georgopoulos
Semester
Fall

Description
What is Economics? Allocation of scarce resources, efficiently Scarcity – our inability to satisfy all our wants Because we face scarcity, we make choices – choices we make depends on our incentives (reward that encourages an action or a penalty that discourages an action) – incentives were wrong played a big role in launching the financial crisis  in economics we try to make proper rules and regulations so people act accordingly in most efficient way Economics is the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices Microeconomics – look at choices made by individuals and businesses, the way those choices interact markets Macroeconomics – look at performance of national and global economies – deals with currency/ medium of exchange – only present in macroeconomics, not microeconomics, most significant difference between the two Inflation – rate of change of prices All things are priced in terms of money If we have inflation, value of a dollar decreases Prices we see are called relative prices, price of one good in terms of others In macroeconomics we have an absolute price level (P) and as a result we have inflation, money distorts the value of things – money has no standard, has a different value depending on the currency – dollar unit is arbitrary – what’s important is the purchasing power – we have to translate that into real goods, how many coconuts does that get you What is efficiency? Marginal benefit equals marginal cost, when they are equal you are distributing resources efficiently  maximizes utility
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