ECON 2020 Study Guide - Fall 2018, Comprehensive Midterm Notes - Graph Of A Function, Demand Curve, Compact Cassette
12 Oct 2018
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ECON 2020
MIDTERM EXAM
STUDY GUIDE
Fall 2018
ECON2020 Lecture 1 Notes- Principles of Economics
What is an economy? What is Economics?
• Economy: oe ho aages a household
o Eaples of household deisios: Ho a kids should e hae? “hould e
both work?
o BIG DECISION in SOCIETY: how to allocate (distribute) scarce resources
o Scarce: limited amount of resources
• Economics: how to manage scarce resources
What do economists study?
• How people make decisions
• Interactions
• Trends and outside forces that could affect the economy
PRINCIPLE ONE: People face trade-offs.
• Decisions must be made
o What do I have to give up in order to get or do something else?
➢ EX: Is it worth it to work overtime and be tired to make that extra money?
o Societal trade-offs: gus ad utter
➢ GUNS: national defense
➢ BUTTER: what the people buy/want, consumer goods
o Should we be more efficient or more equal?
o Efficiency vs. Equality Policies
➢ Efficiency: society getting maximum benefits. Not based on set group of
individuals. Efficiency policies are for everyone. Example: Policy implemented on
drunk driving would be beneficial and OK with everyone. Not individualistic.
find more resources at oneclass.com
find more resources at oneclass.com
➢ Equality: distributing economic prosperity. Based more so on one particular
group of individuals. Example: Letting men and women have the same wages at
the same workplace. Individualistic.
PRINCIPLE TWO: The cost of something is what you give up to get it.
• Comparing cost and benefits: OPPORTUNITY COST
o Weighing more than just the monetary cost of something
o What must I give up?
o EX: Should I go to an instate school that costs less money but with poor education or
should I go to and out of state school that is extremely expensive but offers quality
education?
o EX: Should I go to work after high school and make money now or go to college and
make even more money after?
PRINCIPLE THREE: Rational people think at the margin.
• Economist like to assume everyone makes rational decisions, but that is not the case.
What makes a person ratioal?
• being systematic and being purposeful towards achieving their objectives
What are marginal changes?
• Small actions to change the original plan of action
o EX: Is it rational to study 1 min or 100 hours? No! So, make marginal changes to make it
rational. Instead, study about 1 or 2 hours.
• Marginal benefits: additional benefits
• Marginal costs: additional costs
PRINICIPLE FOUR: People respond to incentives.
• EX: A parent says she will give her child money for cleaning her room. Money is the incentive.
o Incentive: causes person to act on something
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Hould (cid:449)e both work: big decision in society: how to allocate (distribute) scarce resources, scarce: limited amount of resources, economics: how to manage scarce resources. What do economists study: how people make decisions. Interactions: trends and outside forces that could affect the economy. Ex: is it worth it to work overtime and be tired to make that extra money: societal trade-offs: (cid:862)gu(cid:374)s(cid:863) a(cid:374)d (cid:862)(cid:271)utter(cid:863) Butter: what the people buy/want, consumer goods: should we be more efficient or more equal, efficiency vs. Example: policy implemented on drunk driving would be beneficial and ok with everyone. Based more so on one particular group of individuals. Example: letting men and women have the same wages at the same workplace. Principle three: rational people think at the margin: economist like to assume everyone makes rational decisions, but that is not the case. What makes a person (cid:862)ratio(cid:374)al(cid:863): being systematic and being purposeful towards achieving their objectives. So, make marginal changes to make it rational.
