Chatper 1 Study Guide
Chatper 1 Study Guide Econ 2-01
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This 2 page Study Guide was uploaded by Nolan Shapiro on Sunday October 11, 2015. The Study Guide belongs to Econ 2-01 at University of California - Santa Cruz taught by Aaron Meininger in Summer 2015. Since its upload, it has received 67 views. For similar materials see Intro to Macroeconomic in Economcs at University of California - Santa Cruz.
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Date Created: 10/11/15
Chapter 1 Lecture Notes 925 TUTH office hours 1012 Office Engineering 2 403E Course id meininger66833 Chapter 1 Key Ideas 1 Economics is the study of people39s choices 2 The first principle of economics is that people try to optimize they try to choose the best available option 3 The second principle of economics is that economic systems tend to be in equilibrium a situation in which nobody would benefit changing his or her own behavior 4 The third principle of economics is empiricism analysis that uses data Economists use data to test theories and to determine what is causing things to happen in the real world Economic agent any group or individual that makes choices such as consumers firms etc Positive economists tells us how it is Normative economists should or shouldn39t Efficiency marginal benefit marginal cost Chapter 1 Book Noes 11 The Scope of Economics Choices is the unifying feature of all the things economists study 0 An economic agent is an individual or a group that makes choices 0 Consumer 0 Parent 0 Worker 0 Criminal o Etc Economic agent can also be a group 0 Allocation of scarce resources 0 Scarce resources are things that people want where the quantity that people want exceeds the quantity that is available 0 Scarcity exists because people have unlimited wants in a world of limited resources 0 Economics is the study of how agents choose to allocate scarce resources and how those choices affect society 0 Economic analysis 0 Describes what people actually do positive economics 0 Recommends what people ought to do normative economics 12 Three Principles of Economics Economists emphasize three key concepts 0 OptimizationOne such insight is that all choices are tied together by optimization people decide what to do by consciously or unconsciously weighing all of the known pros and cons of the different available options and trying to pick the best feasible option 0 Equilibrium a situation in which no agent would benefit personally by changing his or her own behavior everyone is simultaneously optimizing o Empiricism analysis that uses data or analysis that is evidence based 13 First Principle of Economics Optimization Optimization means that we weigh the potential risks in a decision not that we perfectly foresee the future Tradeoff arise when some benefits must be given up in order to gain other Budget constraint is the set of the things that a person can choose to do or buy without breaking her budget Opportunity cost best alternative activity Cost benefit analysis is a calculation that adds up costs and benefits using a common unit of measurement 0 Used to identify the alternative that has the greatest net benefit which is equivalent to benefits minus costs 14 Second principle of Economics Equilibrium Ex going to shortest super market line For a market price to be in equilibrium 0 The amount produced will equal the amount purchased 0 Producers will only produce goods at a cost that is less than market price 0 Buyers will only use product on activities that is worth the price Free rider problem want someone to do the dirty work 15 Third Principal of Economics Empiricism Economists use data to determine whether our theories about human behavior match up with actual human behavior
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