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ECON 203 notes

by: Amy Fuquay

ECON 203 notes Econ 203

Amy Fuquay
Texas A&M

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Covers chapter 1
Class Notes
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This 2 page Class Notes was uploaded by Amy Fuquay on Saturday August 13, 2016. The Class Notes belongs to Econ 203 at Texas A&M University taught by Pakhotina in Fall 2016. Since its upload, it has received 6 views. For similar materials see Macroeconomics in Economics at Texas A&M University.


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Date Created: 08/13/16
Chapter 1: Economics and Life Scarcity  Scarcity – the condition of peoples wants being greater than available resources  Individuals’ resources – time and money  Societies’ resources – factors of production Economics  Economics – study of how people manage resources  Economics is divided into two broad fields:  Micro: study of individuals and firms  Macro: study of the economy on a regional, national or international scale Choices and rational behavior Opportunity Cost  Every decision in life involves weighing the trade-off between costs and benefits  The economic (opportunity) cost includes both the direct cost and indirect costs  Opportunity cost – the value of what you have to give up in order to get something  Direct cost includes all associated costs (air flight ticket, hotel, meal, ground transportation)  Opportunity cost is the value of your next best alternative use of resources (time, money, efforts, etc.) Marginal decision making  Rational behavior suggests that people compare the additional benefits of a choice against the additional costs referred to as marginal decision making Models  Economic models show how people, firms and governments make decisions about managing resources and how their decisions interact  Models are a simplification of complex problems  What makes a model useful?  Makes clear assumptions  Describes the real world accurately  Predicts cause and effect The circular flow diagram  The circular flow model represents a basic economy


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