Textbook Notes (369,198)
Canada (162,457)
Economics (708)

Textbook Summery

86 Pages

Course Code
Economics 1021A/B
Jeannie Gillmore

This preview shows pages 1,2,3,4. Sign up to view the full 86 pages of the document.
Chapter 1 What is EconomicsDefinition of Economics All economic questions arise because we want more than we can get Scarcity is our inability to satisfy all our wants Faced with scarcity we must make choices 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 Economics divides into Microeconomics and Macroeconomics Microeconomics is the study of the choices that individuals and businesses make the way 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 Two Big Economic Questions The two big questions of economics are1 How do choices end up determining what how and for whom goods and services are produced2 When do choices made in the pursuit of selfinterest also promote the social interest The objects that people value and produce to satisfy human wants are called goods and services Study figure 11 on p 3 of your textbook to determine if Canada is a service economy or a goods economy Factors of production are the resources that businesses use to produce goods and services Factors of production are grouped into four categories land labour capital and entrepreneurship1 The gifts of nature that we use to produce goods and services are called land2 The work time and work effort that people devote to producing goods and services is called labour The quality of labour depends on human capital which is the knowledge and skill that people obtain from education onthejob training and work experience3 The tools instruments machines buildings and other constructions that businesses now use to produce goods and services are called capital4 The human resource that organizes labour land and capital is called entrepreneurship To earn an income people sell the services of the factors of production they own1 Land earns rent2 Labour earns wages3 Capital earns interest4 Entrepreneurship earns profit When we make choices about what how and for whom goods and services are produced we make the choices in the selfinterest or the social interest Choices made in the selfinterest are choices that are best for the person making them Choices that are the best for society as a whole are said to be in the social interest The Economic Way of Thinking Because we face scarcity we must make choices Every choice you make is a tradeoff A tradeoff is an exchangegiving up one thing to get something else People make rational choices by comparing benefits and costsBenefit is what you gain from something Cost is what you must give up to get somethingOpportunity cost is the highestvalued alternative that we give up to get something All tradeoffs involve an opportunity cost When we make choices we make them at the marginwe compare the benefit of a little bit more of something with its cost The benefit that arises from an increase in an activity is called marginal benefit The cost of an increase in an activity is called marginal cost Our choices respond to incentives An incentive is an inducement to take a particular action An incentive can be a benefit or a cost Economics A Social Science Economists distinguish between two types of statements what is and what ought to be Statements about what is are called positive statements and they might be right or wrong A positive statement can be tested by checking it against the facts States about what ought to be are called normative statements These statements depend on values and cannot be testedChapter 1 Appendix Graphics in EconomicsGraphing Data Making a graph o The horizontal line is the xaxiso The vertical line is the yaxiso The intersection of the xaxis and the yaxis is the origin A scatter diagram plots the value of one variable against the value of another variable Graphs Used in Economic Models Variables that move in the same directiono A relationship between two variables that move in the same direction is called a positive relationship or a direct relationshipo A relationship shown by a straight line is called a linear relationship Variables that move in opposite directions o A relationship between variables that move in opposite directions is called a negative relationship or an inverse relationship Variables that have a maximum or a minimum o A relationship that has a maximum slopes upward as it rises to its maximum point is flat at its maximum and then slopes downwardo A relationship that has a minimum slopes downward as it falls to its minimum point is flat at its minimum and then slopes upward Variables that are unrelated o Variables that are unrelated are shown on a graph as either a horizontal line or a vertical line
More Less
Unlock Document

Only pages 1,2,3,4 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.