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Chapter 2

Econ 1BB3 - Chapter 2.docx

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McMaster University
Bridget O' Shaughnessy

Richard Damra Tuesday, January 08, 2013 Econ 1BB3 – Chapter 2 Recap of Ch 1  Likely criminals: Young men, raised in poverty. Without abortion, unwanted babies were born and grew up to be criminal. Legalizing abortion prevented unwanted criminals from being born. Therefore, abortion lowered crime rates Chapter 2  (1)Why is econ difficult? o Express ideas in economics:  1. English Language  2. Algebra/Equations  3. Diagram/graph  Translate between each different form of communication  Example: People buy less coffee when the price of coffee rises.  Q of C = 100-3P sub c  (2)Economics is a social science o Social = people o Science = use scientific method  Observe  Theorize  Test theory (if fails go back to theorize)  (3) Micro vs Macro o Microeconomics: individual households & firms and how they interact o Macroeconomics: economy – wide phenomena such as interest rates, unemployment, money and growth  (4) Efficiency vs Equity o Efficiency is the size of the pie o Equity is how the pie is divided o If we are more efficient we can make a bigger pie (Efficiency) o Typically there is a trade-off between the two in the market economy, if we are more efficient we are less equity, vice versa. o Communists is a perfect trade off in theory but incentive comes into play. Since
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