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Week 1 Notes

by: Michael Notetaker

Week 1 Notes ECON103011

Michael Notetaker
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About this Document

The focus was on introduction and Chapter 1
Professor Abrams
Class Notes




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This 2 page Class Notes was uploaded by Michael Notetaker on Thursday February 11, 2016. The Class Notes belongs to ECON103011 at University of Delaware taught by Professor Abrams in Winter 2016. Since its upload, it has received 212 views. For similar materials see Macroeconomics in Economcs at University of Delaware.


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Date Created: 02/11/16
Week 1 Notes • Titanic example of macroeconomics-the ship is the economy and its difficult for the economy to respond to an immediate iceberg approaching because the economy/ship is too big to shift its course that swiftly • Scarcity-restricts options and demands choices, resources are limited • Opportunity cost-the price you paid/the thing you gave up in order to get something • Utility-pleasure or satisfaction • Marginal-extra, additional • Marginal analysis-comparison of marginal benefit and marginal cost • We assume everyone acts with rational self-interest, not selfishly • Other-things-equal/ceteris paribus-the things that aren’t being studied are assumed to have no effect on the results (Pepsi example-we assume we only change the price of Pepsi, not price of Coke or taste of Pepsi etc.) • Microeconomics-the study of individual consumers, firms, or markets (ex. increase in the market of fashion) • Macroeconomics-the study of the market more generally/the entire market (ex. the unemployment of the United States) • Positive economics-economic statements that can be true or false, factual (ex. the economy fell 3 points yesterday) • Normative economics-economic statements that involve value judgment, up for debate (ex. the unemployment rate ought to be lower) • Economizing problem-the need to make choices because economic wants exceed economic means • Budget line-a schedule that shows various combinations of two products a consumer can purchase with specific income (ex. DVD’s and books) • Trade-offs-giving up purchasing one thing in order to purchase another • Economic resources-capital (machines, things that go into the production of consumer goods), entrepreneurial ability (innovative ideas, risk taking, bringing resources together), land (natural resources), and labor (manual and intellectual) • Consumer goods-goods that satisfy consumers immediately • Capital goods-goods that help grow economy, goods that help enhance production of consumer goods • Production possibility curves/tables o Law of increasing opportunity cost-as the production of a particular good increases, the opportunity cost of production of an additional unit increases (ex. additional robot is 4 , 3/ ,2 / , and 1 unit of pizza), you have to use less skilled resources or more scarce materials to produce more units (resources are not interchangeable) o Economic growth-trade, additional resources, education, technology that uses resources more efficiently, shifts curve outward o Specialized trade can increase the consumption possibility curve by increasing the production of the good that has a lower opportunity cost of the other country and trade the specialized good for the non-specialized good (ex. opportunity cost for Country A is 1 pizza=1 CD, but Country B will trade 2 pizzas for 1 CD, now Country A can get more CD’s and pizza by specializing in producing CD’s and trading for pizza) • Fallacy of composition-good for one person doesn’t mean good for society (ex. Google maps) • Something can be related but that doesn’t mean that one causes the other (ex. there is a 99% correlation in Maine between the consumption of margarine and the divorce rate, this does not mean that an increase in margarine consumption causes divorces)


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