Eco 106 Chapter 1
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This 2 page Class Notes was uploaded by Kirstie Mekhail on Tuesday February 2, 2016. The Class Notes belongs to ECO 106 at Pace University taught by Weinstock in Summer 2015. Since its upload, it has received 11 views. For similar materials see Principles of economics: microeconomics in Economcs at Pace University.
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Date Created: 02/02/16
Chapter 1 Economics is the science of choice, exploring the choices made by individuals and organizations S carcity – The resources we use to produce goods and services are limited Economics – the study of choices when there is scarcity Examples of scarcity and the trade-‐off associated with making choices • You have a limited amount of time. Each hour on the job means one less hour for study or play. • A city has a limited amount of land • You have limited income this year Factors of Production – the resources used to produce goods and services; also known as production inputs, or resources. Natural Resources – resources provided by nature and used to produce goods and services Labor – human effort, including both physical goods and services Physical Capital – the stock of equipment, machines, structures, and infrastructure that is used to produce goods and services Human Capital – the knowledge and skills acquired by a worker through education and experience and used to produce goods and services Entrepreneurship – the effort used to coordinate the factors of production to produce and sell goods Positive Analysis: answers the question “what is?” and “what will be?” Normative Analysis: answers the question “what ought to be?” The Three Key Economic Questions: 1. What to products do we produce? 2. How do we produce the product? 3. Who consumes the product? Economic Model – a simplified representation of an economic environment, often employing a graph Economists use assumptions to make things simpler and focus attention on what really matters Isolate Variable – Ceteris Paribus Economic analysis often involves variables and how they affect one another Variable – a measure of something that can take on different values Marginal Change – a small, one-‐unit change in value. A key assumption of most economic analysis is that people act rationally, meaning they act in their own self -‐ interest.
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