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Chapter 1

Chapter 1- What is Economics?.docx

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York University
ECON 1000
George Georgopoulos

Microeconomics – Chapter 1: What is Economics? (Pages 1-11) Definition of Economics  Our inability to satisfy/get everything we want is called scarcity.  We must make choices due to scarcity.  Incentives (rewards) encourage actions, while penalties discourage them.  Economics 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:  Study of choices individuals and business make, they way these choices interact in markets, and the influence of governments. o Ex: Why are people downloading more movies? o How would a tax on e-commerce affect eBay? Macroeconomics:  Study of the performance of the national economy and the global economy. o Ex: Why is the Canadian unemployment rate so high? o Can the Bank of Canada make our economy expand by cutting interest rates? o 2 Big Economic Questions 1. How do choices end up determining what, how, and for whom goods and services and produced? 2. Can the choices that people make in the pursuit of their own self-interest also promote the broader social interest? What, How, Whom Goods and Services are objects that people value and produce to satisfy human wants. Factors of production are used to determine these patterns, includes 4 categories:  Land  Labour  Capital  Entrepreneurship Land is known as the gift of nature, earns rent. Labour refers to the work time & effort people use to producing g/s, earns wages. Capital is known as human capital (quality of labour), and capital (machines. Buildings etc…) earns interest Entrepreneurship is the human resource, that organizes land, labour and capital, earn profit. Self-Interest - Choices you think are the best for you. Social Interest – Choices best for society, includes; Efficiency  Achieved when available resources are used to produce g/s at the lowest possible price & in quantities that give the greatest possible benefit. Equity  Fairness, but economist of different views of this. 4 Topics between Self-Interest & Social-Interest include: 1. Globalization 2. The Information-Age Economy 3. Global Warming 4. Economic Instability Globalization  The expansion of international trade o Includes borrowing, lending and investing.  Self Interest for consumers to buy low-cost imported g/s.  Self Interest for businesses to produce in low cost regions and sell in high cost regions.  Is there a Social Interest? (Low wage workers and Canadian firms can’t compete) The Information- Age Economy  Technology change within last 40 years, known as information revolution.  Provides us with cellphones, laptops, Internet etc… (self- interest)  Self-Interest for companies $$ Global Warming (Climate Change)  Self Interest to use electricity and gas contributes to carbon emissions.  Contributes to carbon footprint, alternatives to lessen it. o Walking, riding a bi
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