ECON 211 Lecture 1: Aug 19 Notes: The Economic Model

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15 Dec 2015
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ECON 2110: Introduction to Microeconomics Notes August 19th
BACKGROUND: Adam Smith -- father of economics -- book 1776)
Microeconomics:
Has to do with the individual (micro)
What happens when individual consumers and producers interact in the
marketplace? ex: Gasoline: high demand, high cost, low supply = high price
Provides a model for human behavior
The economic model summed up ------- PEOPLE RESPOND TO INCENTIVES
The people make decisions by comparing benefits v costs
“Benefits” “Costs” ---- broad terms
Happiness = benefit
Money = benefit
Sadness = cost
The economic model can address different questions:
Why has the price of soybeans fallen?
Why has the price of NFL tickets risen?
Why do U.S. families have fewer children today?
Etc. Etc.
What is it not????
Common sense
cars & safety features -- does it affect how drivers drive?
Hypothesis - safer car = faster speeds
Test - what do we expect to find?
More accidents
Fewer deaths (driver/passenger)
More pedestrian deaths
^^^^^^^^^^^^In total, same # of deaths
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