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Econ 224 Week 1 Teacher Notes

by: Mackenzie Shapiro

Econ 224 Week 1 Teacher Notes Econ 224

Marketplace > University of South Carolina > Econ 224 > Econ 224 Week 1 Teacher Notes
Mackenzie Shapiro
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These are the notes directly from the Professor from week 1, January 11-15
Introduction to Economics
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This 3 page Class Notes was uploaded by Mackenzie Shapiro on Friday January 15, 2016. The Class Notes belongs to Econ 224 at University of South Carolina taught by Nigam in Spring 2016. Since its upload, it has received 39 views.


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Date Created: 01/15/16
Economics 1. Economics a. Science that deals with the allocation, or use, of scarce resources for the purpose of fulfilling society’s needs and wants b. Study of how people choose to use resources A. American Economic Association B. Resources- time, land, etc. C. Incentives D. Benefits E. Trade offs c. Economic freedom A. Freedom of market place to buy and sell d. Economic efficiency A. Economic decision where MC=MB B. MC= marginal cost C. MB= marginal benefits e. Economic equity A. Fair/unfair f. Economic security A. Protection against economic risk g. Economic stability A. Full employment and absence of inflation h. Economic growth A. Enlarging production capacity and improving living standards 2. Microeconomics a. Study of behavior of individual economic agents b. Consumer choice theory c. Market structures A. Perfect competition, monopoly d. Public sector economics A. Public goods, common resources e. Firm behavior and industrial organization 3. Macroeconomics a. Study of aggregate measures of the economy b. Goals: price stability, low unemployment rate, economic growth c. Complementary goals A. Low unemployment and high economic growth d. Conflicting goals A. Low unemployment and low inflation B. As few people unemployed as possible and the prices don’t rise much C. It is a trend that as prices increase, more jobs become available 4. Key principles of economics a. Scarcity, choice, and opportunity cost b. Rational self interest A. “greed is good” c. Relationship between opportunity cost and rational self interest d. Decisions are made at the margin 5. Scarcity, Choice, and Opportunity Cost a. Production process: Inputs Outputs b. b. - Nonhuman resources (natural goods resources and real capitol) b. b. Human resources services b. b. Limited resources c. Unlimited wants d. Scarcity – resources, goods and services are limited relative to the wants and desires for them e. Choice f. Opportunity cost – the highest valued alternative foregone in making any choice 6. Rational self interest a. Rational A. Individuals are able to estimate benefits and costs (net benefit) of a particular action B. They are able to compare the net benefits of alternative actions b. Self interest A. Only engage in that activity if the net benefit is greater than zero B. Engage in the activity that yields the greatest net benefit 7. Economic decisions are made at the margin a. Marginal benefit A. The increase in total benefit from the production or consumption of one additional unit of a good or service b. Marginal cost A. The increase in total cost from the production or consumption of one additional unit of a good or service 8. Theory in practice a. Economic theory and models A Accurately explains history B Makes reasonable predictions about the future B. Keep models simple C. Occam’s Razo – eliminate complicating details b. Fallacy of compositions A. Cant generalize the aggregate based on the expected behavior of a single person acting alone c. Positive economics (language) A. Positive economics – explains what will happen under certain conditions B. Normative economics – explains what should happen Chapter 4 9. Demand and Supply a. Demand A. Quantity demanded – is the amount of a good that buyers are willing and able to purchase at a given price (price of one unit of a good) B. Demand – is a full description of how the quantity demanded changes as the price of the good changes C. Market demand is the sum of individual demands D. The law of demand – the quantity demanded of a good falls when the price of the good rises, and vice versa, provided all other factors that affect buyer’s decisions are unchanged o “provided all other factors remain unchanged” o this is an important phrase in the wording of the law of demand o the quantity demanded of a consumer good such as ice cream depends on: o price of ice cream o price of related goods o consumer incomes o consumer’s tastes o consumer’s expectations o number of buyers E. the law of demand says that the quantity demanded of a good is inversely related to its price, provided all other factors are unchanged F.


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