ECO 103 - Chapter 1 Notes
ECO 103 - Chapter 1 Notes Eco 103
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This 3 page Class Notes was uploaded by Shannon Surell on Saturday January 30, 2016. The Class Notes belongs to Eco 103 at Illinois State University taught by Amir Marmarchi in Spring 2016. Since its upload, it has received 114 views. For similar materials see Individuals and Social Choice in Economcs at Illinois State University.
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Date Created: 01/30/16
ECO 103 – Amir Marmarchi Tuesday, January 12 Introduction Meta knowledge: our knowledge/ perception about the knowledge of others Hard easy effect: harder the task gets, the more overconfident our judgements become Silent evidence: ways that were tried and were not successful or significant Types of Errors Type 1: believing in existence of an effect or relationship that doesn’t exist (false positive) Type 2: Nonbelieving in existence of an effect or relationship that does exist (false negative) Type 3: Asking the wrong question Type 4: Wrong interpretation of a correct conclusion (ex. Wrong prescription after correct diagnosis) Error of “commission” vs. error of “omission” Thursday, January 14 – Chapter 1 Economics: study of how society chooses to manage its scarce resources to satisfy its wants Economy: type of organization that produces goods and services and then allocates those goods/services to its members An economy can be as small households or as large as USA Derives from the Greek word oikonomia “household management” Distributive (market) system typically works better Command and control does not work as well (central control) o Ex) North Korea 2 Key Questions 1) What are we going to make with our resources? Answer these simultaneously! 2) How do we decide who gets to enjoy it? Scarcity: we don’t have the resources necessary to fulfill all of our wants We assume our wants are endless, but our means to satisfy them are not Tradeoffs: when we have to make choices about which desires to satisfy and which to leave unfilled Tradeoffs = opportunity cost Opportunity cost: what must be sacrificed to obtain something Applies to individuals and other levels of society NOT ABOUT MONEY because… o Money is a contrivance invented to help facilitate exchange o Not all opportunities are easily measured in dollars Explicit Cost: costs that are measured in dollars Typically involve exchange of money Implicit Cost: cost that doesn’t involve money Can be difficult to measure Hard to account for them because they are opportunities that never materialize Public policy: collection of laws, regulatory measures, and actions concerning a particular topic that originate with some body of government Saves some, doesn’t save others Government Actions Aren’t always the best way to solve our problems o Could make things worse A government that tries to solve problems that the people can solve themselves is a waste of resources Tuesday, January 19 Incentives: inducements to act a certain way Can encourage/discourage particular behavior Can appear in form of cost They work by changing the tradeoffs individuals face o Can convince people to act a certain way o Price signal of scarcity o Price signifies information about product in today’s world and into the future o Ex) government gives a tax credit if you by a fuelefficient car Altruism: to care about others more than yourself To decrease crime: Investment in surveillance/increase cops Increase punishment Collective action problem: when naturally occurring incentives encourage sufficient numbers of people to act in a way that makes everybody worse off Individuals tradeoffs are different than social incentives No individual has any incentive to act in the best interest of the group Individuals may be powerless to solve problems by themselves Government actions may be required Ex) when one person stands at a concert, then everyone stands Positive economics: description of current state Can be proved/disproved helps avoid making judgements about what is “fair” typically what economists use Normative economics: an opinion of what a state should be Can be neither proved/disproved
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