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This 3 page Class Notes was uploaded by Karlee Castleberry on Tuesday January 19, 2016. The Class Notes belongs to Econ 2020 at Auburn University taught by William M. Finck in Spring 2016. Since its upload, it has received 212 views. For similar materials see Principles of Economics: Microeconomics in Business at Auburn University.
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Date Created: 01/19/16
Econ 2020 – Exam 1 Lecture 1 definition formula Chapters 1 & 2 Intro to econ o What are we studying? Choices o Economics- the social science concerned with how individuals, institutions and society make optimal choices under conditions of scarcity o Scarcity- the condition whereby the resources we use to produce goods and services are limited relative to our wants for them o Scarce good- economic good = good for which you can NOT get all you want at zero COST Cost- *not price o Free good- opposite of scarce; you can get all you want at zero COST Someone paid for the ink for junk mail = not free Ex: air o Price vs. Cost NOT the same thing Price- signal that tells producers what and how much to produce; in a standard market transaction it is paid by the consumer Ex: price tag Cost- the sacrifice associated with making a choice; in a standard market transaction it is paid by the producer Ex: what it took to make the shirt (money, labor, tools, ect.) Types: o 1. Explicit cost: out of pocket, monetary payments nothing paid when walking in the door for class; just cost time to get here o 2. Implicit/opportunity cost***- most valued option forgone (what you gave up) now that I’m doing this, I can’t do something else (eating, sleeping, working, ect.) in order of most value- number one is opportunity cost o 3. Economic cost- explicit + implicit Economic cost of Attending Auburn o Explicit costs: Tuition- $41,696 Books- $4,800 o Opportunity cost: Full time job (with just a high school degree)- $98,176 o Economic cost: $144,672 o Resources- the inputs used in the production of goods and services; aka factors of production Types you’ll need: Natural- land, oil, lumber, ect. Labor- physical and mental talents used in production 2 Capital- all manufactured goods used in production o How do we make choices? We try to maximize our utility by using marginal*** decision making Utility- the satisfaction a consumer obtains from the consumption of a good or service Marginal- additional; the change that results from an additional unit NOTE: utility maximization by producers and consumers usually maximizes social welfare 3
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