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by: Laura Sears


Laura Sears

Logan Lee

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About this Document

These are the notes from Week 1.
Logan Lee
Economics, university of oregon
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This 3 page Reader was uploaded by Laura Sears on Friday April 18, 2014. The Reader belongs to a course at University of Oregon taught by a professor in Fall. Since its upload, it has received 131 views.


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Date Created: 04/18/14
EC201 41 What is Econ The study of decision making Who is making the decisions What39s that decision going to be What decision needs to be made Some Key Words Policy action taken by a government firm individual to in uence behavior Scarcity this idea that resources are not unlimited but our need for them is Microeconomics study of individual units that make up our economy Comparative Advantage an item an individual government can produce at a lower opportunity cost than others in the market Can be naturally occurring or developed Absolute Advantage the ability of one producer to make more than another using the same amount of resources Ceteris Paribus holding all else constant usually for Econ models 5 Foundations of Econ Anyone who took Econ in high school should have these burned into your brain for all eternity but as a refresher here you go Incentives factors that motivate our behaviors they can be negative or positive direct or indirect amp indirect positive or direct negative 0 They are used to yield good results or prevent bad ones and can be unintended indirect incentives Tradeo fs to achieve something we must give another up usually non material like time amp health give up an hour of studying to watch the new Game of Thrones 0 It is important to note that with prices there is a tradeoff You can39t change the price of an Econ text book without changing the rest of them whether indirectly making them cheaper used text book or more expensive shiny new 2014 edition Opportunity Cost This is highest valued alt you must sacrifice in order to get something else you want 0 If you choose wisely you can usually minimize your opportunity cost 0 In class Prof Lee gave the true cost of college example People who attend college generally make tens of thousands more than non college grads By going to college and selling our souls for loans we are minimizing our opportunity cost Marginal Thinking Everyone remember the thinking within the margin mantra our Econ teachers used Well this is it Is it beneficial to add one more less unit of what we want or is the opportunity cost too damn high 0 Studying is the most popular and relatable example for this guy I How much higher will my grade be if I study one more hour I What could I be doing with that hour that is more beneficial than studying I Is a grade increase I would achieve ifl studied one more hour more beneficial than what I would be doing alternatively Trade this is pretty self explanatory It is a voluntary exchange of goods services in a market of buyers sellers Because it is voluntary what a person is receiving must be the same or higher value than what they are offering up o This creates profit for everyone involved and allows for specialization 43 Positive Normative Statements Positive Statements These can be disproved validated o Ex There are more females than males at the University of Oregon Normative Statements These cannot be tested and proved disproved Usually they are opinion statements and include words like should or could 0 Ex The Ducks should win the National Championship this year Econ Models The economy is too complicated to fully analyze so economists created models to allow specific studies The Scientific Method For Economists Step 1 Observe phenomenon o Peppermint White Mocha sales go up during Christmas time guys hang in there Step 2 Create hypothesis o Explain why this phenomenon would occur Step 3 Create a model to test hypothesis o These are simplified versions of what is occurring in reality to analyze this phenomenon PWM sales o Should be easy to understand amp only alter one aspect at a time o Endogenous Factors variables you can control o Exogenous Factors variables you cannot control Step 4 DesignPreform experiments to test how your model will work Step 5 Analyze the data amp verify refute your hypothesis Production Possibility Frontier PPF One of the most common models Illustrates the outputs if all resources are being used as efficiently as possible The PPF curve shows the tradeoffs between the production of two goods If we want to produce more of one thing we have to produce less of the other Law of Increasing Relative Cost opportunity cost of producing a good increases and more of that good is created curve shows this PPF amp Growth Originally assumed that resources technology were constant but there are changes in these things all the time so the curve has to reflect that If technological advancements allow for more production the curve shifts out to represent this increase in production


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