ECON102 Chapter Notes - Chapter 1: Human Capital, Opportunity Cost
15 Jun 2018
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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.
Keynes Def.: Economics is the way people make decisions.
Microeconomics: Individual choices (persons, businesses, etc)
Macroeconomics: Collective choices (governments, countries, etc)
Three important questions:
What? How? For whom?
Self-interest vs Social-interest
(equity) vs (efficiency)
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)
- Entrepreneurship (profit)
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ECON102 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. : economics is the way people make decisions. Factors of production (fops): land, labour, capital, entrepreneurship. Labour (physical and intellectual --> human capital) 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. Economics is a social science: because it deals with individuals making decisions. 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. Benefits: economists measure benefit as the most that a person is willing to give up to get something.
