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ECON 1000 Study Guide - Final Guide: Price Ceiling, Economic Surplus, Demand Curve


Department
Economics
Course Code
ECON 1000
Professor
Sadia Mariam Malik
Study Guide
Final

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ECON 1000
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
oMicroeconomics vs. Macroeconomics: no money involved in
microeconomics
Two big economics questions
oHow do choices end up determining what, how, and for whom goods
and services get produced?
oWhen do choices made in the pursuit of self-interest also promote
the social interest?
Factors of production
oLand: 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)
oLabour: earns wages
work, time and effort that people devote to production goods
and services
physical and mental efforts
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quality depends on human capital (knowledge and skill that
people obtain from education, training, and experience)
oCapital: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
oEntrepreneurship: 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
oused 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
oGlobalization
expansion of international trade, borrowing, lending , ad
investment
oThe information-age economy
technological change of the 1990s and 2000s
oGlobal warming
climate change and political issues associated
oNatural resource depletion
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Over-fishing in international waters, clear-cutting rainforests,
etc.
oEconomic instability
Choices leading up to recession, etc.
tradeoff: an exchange, giving up one thing to get something else
as a society tradeoff current consumption and leisure time for
economic growth and higher future consumption
saving, education, research and development
oWhat: spending income on various things, what to produce
oHow: choosing among alternative production technologies
oWhom: distribution of buying power(voluntary payment, theft, taxes
and benefits)
big tradeoff: between equality and efficiency
opportunity cost: the highest valued alternative forgone
o"There's no such thing as a free lunch"
margin:the consequences of making incremental changes in the use of
resources
omarginal benefit: the benefit that arises from an increase in an
activity
decreasing function
omarginal cost: the cost of an increase in an activity
increasing function
oIf marginal benefit exceeds marginal cost, incentive to do more of that
activity.
oIf marginal cost exceeds marginal benefit, incentive to do less of that
activity.
oIncentives are the key to reconciling self-interest and the social
interest.
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