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Chapter 1

Chapter 1 - ECON 1000

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ECON 1000
Sam Lanfranco

Chapter 1 What is EconomicsOctober11111017 AMEconomic questions stem from scarcityScarcity is the inability to satisfy all our wantsWhat we can as society is limited by productive resourcesLand labour capital entrepreneurshipChoices we make depend on incentivesIncentives are rewards that encourage or discourage an actionEconomicsstudies choices that individuals businesses governments and entire societies make as they cope with scarcity and incentives that influence and reconcile those choicesMicroeconomics choices that individuals and businesses makeHow they interact in marketsInfluence of governmentExample Why are people buying more DVDs and fewer movie ticketsHow would tax on ecommerce affect eBayMacroeconomics study of national and global economic performanceExample Why did inflation in Canada rise in 2008Can Bank of Canada keep our inflation rate under control by raising interest rateTwo Big Economic QuestionsHow do choices end up determining what how and for whomgoods and services are producedHow can choices made in the pursuit of selfinterest also promote thesocial interestWhat How and For WhomGoods and services are objects that people value and produce to satisfy human wantsGoods physical objects like cell phones and automobilesServices tasks performed for people such as cell phone service and autorepair serviceWhatWhat is produced changes over timeThe past had more people working on farms now more than 75 of working Canadians have service jobsHowGoods and servicesare produced with factors of productionLandGifts of natureAlso known as natural resourcesExample minerals oil gas coal water air forests and fishSome are renewable some are notLabourWork time and work effort that people devote to producing goods and servicesPhysical and mental efforts of all people who work on farms and officesQualityis dependent on human capitalKnowledge and skill people obtain from education onthejob training and work experienceExample economics courseGrows overtime as a society more people in universityCapitalTools instruments machines buildings and other constructions used to produce goods and services called capitalMoney is financialcapital not CapitalImportant in enabling businesses to borrow funds but does not produce goods and servicesEntrepreneurshipHuman resource that organizes labour land and capitalNew ideas regarding what how to produce itemsmake business decisions and bear risks that arise from decisionsFor WhomWho consumes goods and services produced depends on incomes that people earnLarge income allows one to buy large quantities of goods and services small income small quantitiesIncome is earned by selling services of factors of production one ownsLandrentLabourwagesCapitalinterestEntrepreneurshipprofitLabour earns the most income 70Knowing how income is shared among factors doesnt tell us how it is shared among individualsExample CEO may earn billions entrepreneurship Cleaners earn minimum wage labourTo understand who consumes goods and services one looks at percentage of total income earned by different groupsPoorest 20 earn 5 of total incomeRichest 20 earn nearly 50 of total incomeTherefore Richest 20 earn 10x more than poorest 20How Can the Pursuit of SelfInterest Promote the Social InterestEveryday each individual makes economic choices that result in what how and for whomgoods and services are producedSelfinterestChoices are in selfinterestif it is the best choice for youExample You order pizza because youre hungry not because delivery man needs an incomeEach selfinterested choice affects thousands of others who produce and deliver goods and services you buy or sellEverybody makes their own choice in self interest what to produce how to produce who to hire who to work forExample pizza delivery man is earning income and looking for a tip not to do a favourSocial Interest ECON 1000 Page 1
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