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Chapter 1: Introduction to Economics (EC 205 Fundamental of Economics)

by: Ashley White

Chapter 1: Introduction to Economics (EC 205 Fundamental of Economics) EC 205-601 LEC (7540)

Marketplace > North Carolina State University > Economcs > EC 205-601 LEC (7540) > Chapter 1 Introduction to Economics EC 205 Fundamental of Economics
Ashley White
GPA 3.67
Fundamentals of Economics
Nowell, A

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About this Document

These notes cover on the introduction to economics and the basics of the economy. All the keywords are highlighted and in bold. Keynotes are under each definition of the keywords.
Fundamentals of Economics
Nowell, A
Class Notes
25 ?




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This page Class Notes was uploaded by Ashley White on Wednesday January 6, 2016. The Class Notes belongs to EC 205-601 LEC (7540) at North Carolina State University taught by Nowell, A in Fall 2015. Since its upload, it has received 31 views. For similar materials see Fundamentals of Economics in Economcs at North Carolina State University.


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Date Created: 01/06/16
Fundamental to Economics Chapter 1 Introduction to Economics Economy Mechanism through which the use of labor land structure vehicles equipment and natural resources is organized to satisfy the desires of those who live in a society The economy is dynamic and constantly changing Economics Study of how human beings make choices to use scarce resources as they seek to satisfy their unlimited wants Concemed with the use of available productive resources in society to satisfy what often are con icting desires and demands It is also concerned with choices Scarcity The imbalance between our desires and the means of satisfying those desires Opportunity Costs Choosing to use resources for one purpose is the sacrifice of the next best alternative for the use of those resources Three Basic Economics Decisions 0 What will be produced 0 How will goods and services be produced 0 To whom will goods and services be distributed Microeconomics vs Macroeconomics Economics analysis is divided by two branches microeconomics and macroeconomics Microeconomics Takes a very close up view of the economy by concentrating on the choices made by the individual participants in the economy Ex Consumers workers business managers and investors Analyzes ways individuals choose among different courses of action by weighing both the benefits and the cost of alternatives available to them Also studies the action of individuals as they buy and sell in the market transition Macroeconomics Looks at the economy from broader perspective by considering its overall performance and the way various sectors of the economy relate to one another Examines change in total national production and consumptions averages of the price of broad groups of good and services and the employment of workers in the economy Explains the special emphasis in the causes of unemployment Unemployment Rate The number of jobless workers who are actively looking for work or who have been laid off from a job and are looking for work expressed as percentage of total labor force Unemployment is often a huge issue in both congressional and presidential elections In ation General yearly increase in the average level of prices for broad spectrum of goods and services Erodes purchasing power of money Positive Analysis vs Normative Analysis Positive Analysis A way to forecast the impact of changes in economic policiesconditions on observable items production sales prices personal items and incomes Determines what gains on loses as a result of change Makes statement in ifthen format that can be supported or refund by empirical evidence Cannot be demonstrated to evaluate outcomes Normative Analysis A way to evaluate the desirability of alternative outcomes according to underlying value judgements Presents point of view about what a policy should accomplish Makes recommendation regarding what ought to be Economic Way of Reasoning Models and Marginal Analysis Big goal of economic analysis is to help us understand functions on the economy and the forces in uencing people that are made under the constraints they face Marginal Analysis Study decisionmaking that are based on idea that s possible for you to gain from engaging in more of an activity when extra benefits exceeds extra benefits Theory Frameworks that help us understand the relationship between cause and effect Variable Quantities or dollar amounts that can have more than one value Economic Model Simplified way of expressing how some sector of the economy functions Ceteris Paribus Used to acknowledge that in uences others than the one whose effect is being analyzed must be controlled for testing the hypothesis Rational Behavior Behavioral Assumptions Establish the motivations of individuals so we can understand cause andeffect relationship among economic variables Rational Behavior Seeking to gain by undertaking actions for which extra benefits exceed the associated extra costs Marginal Benefit The value you place on the satisfaction you obtain from another unit of an item Marginal Cost An item is the sacrifice you must make to obtain each extra unit


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