Economics 1021A/B Chapter Notes - Chapter 1: Information Revolution, Opportunity Cost, Economic Model

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Economics Chapter 1
Scarcity: Our inability to get everything we want (Limited resources, unlimited wants)
(Universal)
Incentive: is a reward that encourages an action or penalty that discourages one (satisfaction)
Economics: is the social science that studies the choices that individuals, businesses,
governments, and entire societies make as they cope with scarcity and the incentives that
influence and reconcile those choices
Microeconomics: is the study of the choices that individuals and businesses make, the wat these
choices interact in markets, and the influence of governments
Macroeconomics: is the study of the performance of the national economy and the global
economy
Goods & services: objects that people value and produce to satisfy human wants
Factors of production: grouped into 4 categories: land, labour, capital, entrepreneurship
- Land: gifts of nature (we use to produce goods and services) (earns rent)
- Labour: time and work effort people put into producing goods and services (physical and
mental) (earns wages)
- Capital: the tools instruments, machines, buildings, and other constructions that
businesses use to produce goods and services (earns interest)
- Entrepreneurship: the human resource that organizes labour, land, and capital (earn
profit)
Self-interest: the best choice available for YOU
Social interest: a choice that leads to an outcome that’s best for a society as a whole (2
dimensions: efficiency (produce goods at the lowest available cost) and equity)
Globalization: expansion of international trade, borrowing and lending, and investment
Information revolution: technological change of the past 40 years
Economic instability: years between 1993 and 2007 were a period of remarkable economic
stability
Trade-off: an exchange-giving up one thing to get something else
Rational choice: one that compares costs and benefits and achieves the greatest benefit over cost
for the person making the choice (only the wants of the person making a choice are relevant to
determine its rationality
What goods and services will be produced in what quantities? The answer is those that people
rationally chose to buy
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