ECON101 Chapter Notes - Chapter 1: Human Capital, Marginal Utility, Opportunity Cost
15 Jun 2018
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Department
Course
Professor
Chapter 1
Scarcity: Limited resources driven by unlimited want.
Incentive: The reward or penalty driving a choice. Incentives can be used
to change self-interest.
Economics: Is the social science that studies the choices that people
make as they cope with scarcity and the incentives that influence and
reconcile those choices.
Prof Def: Economics is the social science that deals with the allocation of
limited resources to satisfy unlimited humans wants.
Microeconomics: Individual choices (persons, businesses, etc)
Macroeconomics: Collective choices (governments, countries, etc)
Three important questions:
What? How? For whom?
or
Allocation? (what and how) Distribution? (for whom) Coordination (self vs
social interest)
Self-interest vs Social-interest
Factors of Production (FOPs): Land, Labour, Capital, Entrepreneurship
- Land (all natural resources)
- Labour (physical and intellectual --> human capital)
- Capital (any asset)
- Entrepreneurship (manages above)
Financial Capital: NOT an FOP. Includes money, stocks, bonds, etc. Is
used to buy physical capital.
Returns on FOPs:
- Land (rent)
- Labour (wages)
- Capital (interest)
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ECON101 Full Course Notes
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Document Summary
Incentive: the reward or penalty driving a choice. Economics: is the social science that studies the choices that people make as they cope with scarcity and the incentives that influence and reconcile those choices. Prof def: economics is the social science that deals with the allocation of limited resources to satisfy unlimited humans wants. Allocation? (what and how) distribution? (for whom) coordination (self vs social interest) Factors of production (fops): land, labour, capital, entrepreneurship. Labour (physical and intellectual --> human capital) Allocative efficiency: resource use is efficient if it is not possible to make someone better off without making someone else worse off. Globalization: the term globalization means the expansion of international trade, borrowing and lending, and investment. Rational choices are made by comparing benefits with costs. Benefit is what you gain from something. Cost is what you must give up to get something. Most choices are (cid:1688)how-much(cid:1689) choices made at the margin.
