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Chapter 1

Chapter 1 of Microeconomics

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Baruch College
ECO 1001

Microeconomics 1/28/14 Chapter 1: The Scope and Method of Economics Economics: the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. -Scarcity forces people to apply economic concepts. The government decides how the resources are allocated. -Society= level of organizations Highest level- Government, businesses, communities Three fundamental concepts: 1. Opportunity cost- what you give up for something else 2. Marginalism- the cost of one more unit (Incremental cost) 3. Efficient markets- the market takes the resource and maximizes the returns/gains for that resource. Rational thinking is based on knowledge, data, and analysis Efficiency: maximizing your output given the input. Industrial Revolution: the period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities. -The study of economics is an essential part of the study of society. -To be an informed citizen requires a basic understanding of economics.
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