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ECON 1050 (382)
Chapter 1

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Department
Economics
Course
ECON 1050
Professor
Eveline Adomait
Semester
Fall

Description
Chapter 1: What is Economics? “All economic questions arise because we want more than we can get.” Economics: the social science that studies the choices individuals, businesses, governments, and societies make as they cope with scarcity and incentives which influence and reconcile these choices Scarcity: inability to satisfy our wants Incentives: a reward that encourages an action or a penalty that discourages one Goods and Services: objects people value and produce to satisfy wants. Goods are tangible, services are intangible Microeconomics: studies the choices that individuals and businesses make, the way these choices interact in markets, and the influence of the government. Focuses on the small details of an economy. Example: “Why are people buying more DVD’s and less movie tickets”? Macroeconomics: studies the performance of the national economy and the global economy. Examines the big picture. Example: “Why did inflation start to increase in Canada in 2008”? 2 major economic questions 1. How do choices end up determining what, how, and for whom goods and services are produce? What-what we produce changes over time; should we produce more or less? Example: In the past 65 years the employment in the service industry grew by 55%, agriculture has fallen because technology made it easier, and less people were needed to work and mange farms. How- 4 factors of production that use productive resources 1) Land- the gift of nature 2) Labour- work time and effort people put into producing goods and services. Human capital- the knowledge and skill people obtain from education, on job training, and work experience. 3) Capital- doesn’t include financial capital, as it does not help to produce goods and services. 4) Entrepreneurship- human resource that organizes land, labour, and capital. Makes business decisions; but not what how and for whom. For whom-who consumes what depends on the income they earn. The more people earn, the more they can buy. People earn income through 4 ways. 1) Land earns rent 2) Labour earns wages 3) Capital earns interest 4) Entrepreneurship earns profit land, capital, -Distribution of income is unequal neurship -Poorest 20%: earn 5% of total income 30% -Richest 20%: earn 50% of total income -Rich are earning money at a greater labour rate than the poor 70% 2. When does the pursuit of self-interest promote social interest? Is it possible? Yes. Self-interest: when one makes a choice that benefits themselves; not always selfish Social Interest: when a choice is made in the best interest of society; resources are used efficiently and goods and services are distributed equally. -Resources are used efficiently when goods and services are produced 1) At the lowest possible cost 2) In quantities that give the greatest benefit  Do we produce the right things in the right quantities?  Do we use our factors of production in the best way?  Do the goods an
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