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ECO 12 - 060

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by: Whitney Davis

ECO 12 - 060 Eco 060

Whitney Davis
Kutztown University of Pennsylvania
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About this Document

These are the notes I've taken from Chapter 1. I hope they are helpful! If you have any questions let me know!
Dr. Sraiheen
Class Notes




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This 3 page Class Notes was uploaded by Whitney Davis on Wednesday January 20, 2016. The Class Notes belongs to Eco 060 at Kutztown University of Pennsylvania taught by Dr. Sraiheen in Winter 2016. Since its upload, it has received 95 views.

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Yes YES!! Thank you for these. I'm such a bad notetaker :/ will definitely be looking forward to these



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Date Created: 01/20/16
Chapter 1: What Is Economics? Economics  A social science concerned with ways a society chooses to allocate scarce (limited) resources to produce goods and services for present and future consumption o Determined by choice o What the public wants o Factors of production (Labor)  Inputs & Resources Scarcity  Our inability to get everything we want when human needs and wants are unlimited  Scarcity has price  We have to make a choice  Choice we make depends on incentives we face  Choice  Trade-offs  Scarcity is NOT shortage or poverty  Shortage = quantity demanded > quantity supplied  Shortage has no price Trade-offs  To get something you must give up something else in return  Win/lose situation Cost  the effort, loss, or sacrifice necessary to achieve or obtain something  Cost has nothing to do with money  Price you pay is NOT the cost  Price is what you give up to gain in return Incentive  A reward that encourages an action or a penalty that discourages an action Economics divides into TWO main parts  Microeconomics o The study of choices individuals and businesses make, the way those choices interact in markets, and the influence of government i. Ex. Question: Why are people buying more e-books and fewer hard-copy books? Ex. Answer: cheaper; convenient for technology purposes  Macro o The study of the performance of the national and global economies i. Ex. Question: Why is the unemployment rate so high in the U.S.? Ex. Answer: Not enough demand overall to buy all goods and services U.S. workers produce, if all economy’s resources were fully employed Two Big Questions of Economics 1. What to produce and how much? 2. How to produce?  Based on cost What to produce  Output mix  Buyers  Consumers  Demand  For demand to exist you have to be: o Willing to buy goods and services o Know whether you can afford it How to produce  Input mix [production, technology]  Cost of production  Supply  Labor is expensive here  Labor is cheaper all over the world o Clothing, toys, cars, etc. To whom?  Income distribution Profit = Revenue – Cost Factors of production  Incomes  Labor  Wages  Land  Rent  Capital  Interest payments  Entrepreneurship  Profit Self-Interest  Making a choice if you think that choice is the best one available for you  It is how you feel that influences your choices  Also promotes social interest o Ex.: El Chapo – pursuing self-interest with drugs; pursuing social interest in drugs Benefits  Anything that makes you better off [happier]  What to produce? o Benefits should be produced under one condition: Benefits > Cost o Public goods [roads, buses, etc.]  No price o Private goods [house, food, laptop, etc.]  Price is paid  Marginal Benefits (MB)  Demand o Is for an additional benefit [one more unit]  Ex.: Buy 1 pair of jeans, get 1 free  Marginal Cost (MC)  Supply o If MB > MC, then increase production of the good o If MB < MC, then decrease “ “ Economists can be either policy advisors, or social scientists  Normative economists statement o Depends on values o Can NOT be tested  Positive economists statement o Says what is currently believed about the way the world operates Economic Model  A description of the economic world that includes necessary features for the purpose at hand  Two Markets: o Goods and services o Production 1. Circular-Flow Model (From the book, pg. 44-45)


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