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ECON 1000 Package (Ch. 1-8).pdf

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ECON 1540
Rebecca Jubis

ECON 1000 Final ExamAIDReview Package Course Coordinator Xiaoqian Vivian Chen Coordinator Emailxchen14schulichyorkucaTutors Annie MacMichael Yeung York SOS Students Offering SupportPreface This document is directed to ECON 1000 students at York University whom are looking for an additional resource to aid them with studying for the course final exam It has been created with regard to the Winter 2010 course This package covers materials from Chapter 1 to Chapter 8 01023 Scarcity arises because we have limited resources but unlimited wantsThe choices that we make depend on the incentives that we face An incentive a reward that encourages or penalty that discourages an actionEconomics a social science that studies the choices that individual businesses governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices two main parts Microeconomics and Macroeconomics MicroeconomicsMicroeconomics study of choices that individualsbusinesses make the way choices interact in markets and influence of governmentsMacroeconomicsMacroeconomics study of performance of the national economy and the global economy012o 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 selfinterest also promote the social interest What HowFor WhomGoodsServices the objects that people value and produce to satisfy human wantsWhatdetermines the items that we produce Howfactors of productiono Land is the natural resourceso Labour is the work time and work efforthuman capital which is the knowledge and skill that people obtaino Capital is the tools instruments machines buildings that businesses use to produce goods and services o Entrepreneurship is the human resource that organizes labour land and capital For Whom depends on the income that people earn The more income a person has the more she has to spend on goods and services We generate income from the factors of production that we ownLand earns rents Labour earns wagesCapital earns interestEntrepreneurship earns profitWhat How and For Whom Tradeoffs Tradeoff is an exchangewhen we give up something to get something else What TradeoffsWhat goods and services get produced depends on choices made by each one of us by our government and by the business that produce the things we buy Raising Marks Raising Money Raising Roofs wwwyorksoscom 2 York SOS Students Offering SupportHow TradeoffsHow goods and services get produced depends on choices made by the businesses that produce the things we buyFor Whom TradeoffsBig tradeoffthe tradeoff between quality and efficiencyOpportunity CostThe highestvalued alternative that we give up when we choose to take one course of actions over anotherCentral idea of economics every choice involves a costChoosing at the MarginThe benefit that arises from an increase in an activity is called marginal benefitThe cost of an increase in an activity is called marginal costChoosing at the margin means to allocate your resources towards the actions that bring you greater benefits than costs Responding to IncentivesA change in marginal cost or benefit changes the incentives that we face and leads us to change our choices The central idea of economics is that we can predict how choices will change by looking at changes in incentivesLess of an activity is undertaken when its marginal cost rises or marginal benefit falls and vice versa Human Nature Incentives and InstitutionsEconomists take human nature as given and view people as acting in their selfinterest345675 Positive statements o What is statementso They might be right or wrong and can be tested using facts Normative statements o What ought to be statements o These statements cannot be tested Unscrambling Cause and EffectCeteris paribus is a Latin term that means other things being equal or if all other relevant things remain the sameEconomic modela description of some aspect of the economic world that includes only the necessary features for the purpose at hand4156781501027Timeseries graph shows the trends and fluctuations in a variable over timeCrosssectional graph shows how the value of a variable changes across the members of a populationScatter diagram shows the relationship between two variables ie Positively related negatively related or unrelatedSlope of a relationship o Positive relationship upwardsloping curve o Negative relationship downwardsloping curve o Change from positive to negative has a maximum pointo Change from negative to positive has a minimum pointtMaximum Minimumpoint pointSlope of a relationship o Calculated be taking the change in value of the variable measured on the yaxis divided by the change in value of the variable measured on the xaxis Slopechange in ychange in x o Straight lines both horizontal and vertical have constant slopes Raising Marks Raising Money Raising Roofs wwwyorksoscom 3
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