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Econ 121: Economics and Economic Reasoning

by: alicekhanh

Econ 121: Economics and Economic Reasoning Econ 121

Marketplace > Santa Ana College > Economcs > Econ 121 > Econ 121 Economics and Economic Reasoning
Santa Ana College

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About this Document

This study guide contains the summary + some extra information that is not in the book (chapter 1 from the book "Principle of Microeconomics" of David Colander)
Gus Montes
Study Guide
Economics, Microeconomics
50 ?




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This 3 page Study Guide was uploaded by alicekhanh on Friday April 1, 2016. The Study Guide belongs to Econ 121 at Santa Ana College taught by Gus Montes in Spring 2016. Since its upload, it has received 30 views. For similar materials see Microeconomics in Economcs at Santa Ana College.

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Date Created: 04/01/16
C HAPTER  1  Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.  Scarcity – the goods available are too few to satisfy individuals’ desires.  Scarcity is constantly changing  We focuses on coordination rather than on scarcity because the quantity of goods, services, and usable resources depends on technology and human action.  Micro is the study of individual choice, and how that choice influenced by economic forces.  Ex: pricing policies of firms, households’ decisions, how markets allocate resources  Macro is the study of economy as a whole  Ex: inflation, unemployment, business cycle, growth  Use “model” to study human  (is a framework that places the generalized insights of the theory in a more specific contextual setting)  Traditional model = looking at self-interest  Behavioral model = enlightened self-interest  Policymakers need to understand the empirical evidence supporting the theory as well as real-world economic institutions to make policy recommendations Self-interest selfish Try to play the game respectfully use other people for their own good, don’t care about the consequences, play rudely  Need to be rational when making decision.  Economic decision rule:  If marginal benefits of doing sth exceed marginal costs, do it.  If marginal costs of doing sth exceed marginal benefits, don’t it.  Opportunity cost is the benefit that you might have gained from choosing the next-best alternative.  Economic reality is controlled by 3 forces: economic forces Social and Political and (the invisible culture legal forces hand) forces  Economic forces is the necessary reactions to scarcity.  Market force is an economic forces that is given relatively free rein by society to work through the market  The invisible hand is the price mechanism, the rise and fall of prices that guides our actions in a market  Economic theory proves nothing about what system is best. It simply gives ways to look at systems and determine what the advantages and disadvantages of various systems will likely be. Normative decisions about what is best can only follow from one’s value judgments.  Theorem – proposition that is logically true based on the assumptions of the model.  Precept is a policy rule that a particular course of action is preferable.  Economists can agree about theorems but disagree about precepts if they have different value judgments about appropriate goals. Positive Normative economic economic  All about what is. - Concerned with what the goals.  Look at the empirical facts, follow from the of the economy should be. assumption of one’s model. - Opinion based => cannot be proved or  Objective and fact based. disproved.  Do not have to be corrected.  Must be able to be tested and proved or disproved. Art of economics (political  Refers to issues of judgment on how to achieve the goals determined in normative economics, giving the facts and logical relationships one finds in positive economics.  Art of economics statements are subject to debate


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