ECON

• What is Scarcity?

  perception of limited resources, when there is not enough to fulfill human needs and wants.
• What is Economics?

  • The study of how society manages its scarce resources.
•  Economists study...

  • how people make decisions how much they work, what they buy, how much they save, and how they invest their savings
  • how people interact with one another
  • analyze the forces and trends that affect the economy as a whole
• 10 Principles of Economics

  1. People Face Trade-offs
  2. The cost of something is what you give up to get it.
  3. Rational People think at the Margin
  4. People respond to incentives
  5. Trade can make everyone better off
  6. Market is a good way to organize economic activity
  7. Government can sometimes improve market outcomes
  8. A country standard of living depends on its ability to produce goods and services
  9. Prices rise when the government print too much money
  10. Society faces a short-run trade off between inflation and unemployment
• An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.

  Market Economy
• Ten Principles of Economics

  What are the 4 principles under how people make decisions?

  1. People face trade-offs
  2. The cost of something is what you give up to get it
  3. Rational people think at the margin
  4. People respond to incentives
• What is efficiency?

  The ability to accomplish a task with minimal wasted resources.
• What is Equality?The property of distributing economic prosperity uniformly among the members of society.
• It is whatever must be given up to obtain some item.

  Opportunity Cost
• Describe Rational People

  People who systematically and purposefully do the best they can to achieve their objectives.
• It is a small incremental to a plan of action.

  Marginal Change
• Something that induces a person to act

  Incentives
• Ten Principles of Economics

  What are the 3 principles under the how people interact?

  1. Trade can make everyone better off
  2. Markets are usually a good way to organize economic activity
  3. Governments can sometimes improve market outcomes
• The ability to own and exercise control over scarce resources.

  Property Rights
• What is a Market Failure?

  When the allocation of goods and services by a free market is inefficient or fails to achieve an optimal outcome.
• The impact of one person's actions on the well-being of a bystander.

  Externalities
• What is a Market Power?

  The ability of a firm to influence the price and quantity of a product in the market.
• Ten Principles of Economics

  What are the 4 principles under how the economy works as a whole?

  1. A country's standard of living depends on its ability to produce goods and services
  2. Prices rises when the government print too much money
  3. Society faces short-run trade-off between inflation and unemployment
• What is Productivity?

  • The quantity of goods and services produced from each unit of labor input.
• What is Inflation?

  An increase in the overall level of prices in the economy.
• It is the fluctuations in economic activity, such as employment and production.

  Business Cycle
• Give examples of important trade-offs that you face in your life.

  Study over sleep
• What items would you include to figure out the opportunity cost of a vacation to South Korea?

  cost, consider missed work and other expenses
• Why should policymakers think about incentives?

  Behavioral response
• Why isn't trade between two countries like a game in which one country wins and the other loses?

  Trade is mutual benefit, not a win-lose situation between countries.
• What are the two main causes of market failure? Give an example of each.

  Externalities and Market Power - pollution and competition
• Why is productivity important?

  it measures efficiency and economic growth
• What is inflation and what causes it?

  Inflation is rising prices; caused by increased demand or decreased supply.
• How are inflation and unemployment related in the short run?

  reducing unemployment may increase inflation, and vice versa.
• What does it mean when it says, the economist as scientist?

  • Involves thinking analytically and objectively
  • Makes use of the scientific method
  • Uses abstract models to help explain how a complex, real world operates
  • Develops theories, collects, and analyzes data to evaluate the theories
  • Make assumptions to make the world easier to understand
  • Use models to simplify reality to improve our understanding of the world
• THE TWO BRANCHES OF ECONOMICS

  Microeconomics and Macroeconomics
• It is the study of how households and firms make decisions and how they interact in markets.

  Microeconomics
• What is Macroeconomics?

  The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
• What does it mean when it says that the economist as a policy maker?

  The economist is involved in making decisions and recommendations regarding economic policies.
• An assertion about how the world is; examining evidence.

  Positive Statement
• An assertion about how the world ought to be; often involve view on ethics, religion or political philosophy.

  Normative Statement
• Positive or Normative statement?

  An increase in the minimum wage will cause a decrease in employment among the least-skilled.

  Positive
• Positive or Normative

  Higher national budget deficits will cause interest rates to increase.

  Positive
• Positive or Normative

  The income gains from a higher minimum wage are worth more than any slight reductions in employment.

  Normative
• Positive or Normative

  Local governments should be allowed to collect from tobacco companies the costs of treating smoking-related illnesses among the poor.

  Normative