ECON 2020 (Dr. Macy Finck) August 15-19
ECON 2020 (Dr. Macy Finck) August 15-19 Econ 2020
Popular in Principles of Economics: Microeconomics
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This 1 page Class Notes was uploaded by Gabrielle Ingros on Saturday August 20, 2016. The Class Notes belongs to Econ 2020 at Auburn University taught by William M. Finck in Fall 2016. Since its upload, it has received 187 views. For similar materials see Principles of Economics: Microeconomics in Economics at Auburn University.
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Date Created: 08/20/16
ECON 2020 Lecture 1: Introduction to Economics Economics: making choices o Economics – the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity Microeconomics focuses on the individual rather than the whole o Scarcity – the condition whereby the resources we use to produce goods and services are limited relative to our wants for them Scarce Good – an economic good – good for which you can NOT get all you want at zero COST Free Good – opposite of above; you can get all you want at zero COST o Resources – the inputs or factors used in the production of outputs/products/goods and services Types of Resources: natural (land, oil, lumber, etc.); labor (physical and mental talents used in production); capital (all manufactured goods used in production); entrepreneurship (the ability to combine other resources into valuable outputs) Price vs. Cost o Price – signal that tells producers what and how much to produce; in a standard market transaction it is paid by the consumer o Cost – the sacrifice associated with making a choice; in a standard market transaction it is paid by the producer Explicit Costs – outofpocket, monetary payments Implicit (Opportunity) Cost – most valued option forgone Economic Cost = explicit + implicit costs Example: economic cost of attending Auburn (assuming all in state) o Tuition $10,696 x 4 = $42,784 (explicit cost) o Books $1,200 x 4 = $4,800 (explicit cost) o Full Time Job $26,104 x 4 = $104,416 (opportunity cost) o Total $152,000 (economic cost) How do we make choices? o We try to maximize our utility by using marginal decision making Utility – the satisfaction a consumer obtains from the consumption of a good or service Marginal – additional; the change that results from an additional unit o Note: utility maximization by producers and consumers usually maximizes social welfare
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