Econ 2105 Week 1
Econ 2105 Week 1 ECON 2105 080
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This 3 page Class Notes was uploaded by Hagar Notetaker on Thursday August 25, 2016. The Class Notes belongs to ECON 2105 080 at Georgia State University taught by in Summer 2016. Since its upload, it has received 21 views. For similar materials see PRINCIPLES OF MACROECONOMICS in Economics at Georgia State University.
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Date Created: 08/25/16
8/25/16 Econ 2105 Principles of Macroeconomics What is Economics? o Study of how people allocate limited resources to satisfy unlimited wants Unlimited Wants o More preferred to less Leads to unlimited wants o Scarcity Limited nature of society’s resources, given society’s unlimited wants Nothing is unlimited Econonomics Macro Micro All stuff together as a huge Study of individual decision economy making units individual job Inflation choice Economic growth & productivity coufamilyarting unemployment firm opens another factory Interest Rates effects of gov't on a single market GDP 8/25/16 Econ 2105 Chp. 1: The 5 Foundations of Economics Foundations: 1.) Incentives matter 2.) Life is about trade-offs 3.) Opportunity cost 4.) Marginal thinking 5.) Trade creates value 1.) Incentives Matter Incentive o Factor that motivates you to act or exert effort o People respond to incentives o Incentives are everywhere Financial gain is prominent cause Positive Incentive o Encourages action Ex: Tax refund, pay raise, etc. Negative Incentives o Enourages actions Ex: Jail, fees, etc. Direct Incentives o Easy to recognize Ex: Money offer, lower gas prices, etc Indirect Incentives o Harder to recognize o Usually consequence Lower gas prices causes people to drive more and need more gas Uninteded Consequences o Unplanned results Australia baby bonus Gov’t offers money to couples who have babies on or after July 1, 2004 Direct Incentive: have more babies & increase birthrate Indirect Incentive: delay birth date for money, though may jeopordize baby’s health 8/25/16 Econ 2105 2.) Trade offs Because of scarcity, decision imply costss o Who do I vote for? o College or work? Gov’t do trade-offs o Clean environtment vs high levels of income Gain: Clean air Loss: Less industry 3.) Opportunity Costs Highest valued alternative must be sacrificed to get something else Not ALL alternatives, only next best thing Scarcity Choice Opportunity Cost 4.) Marginal Thinking Economic thinking o Systematically evaluating a course of actions Requires purposefull evaluation of available opportunities for best decision Marginal thinking o Whether benefit of 1 more unit is greater than cost 1 more slice of pizza 1 more hour of studying Pretend you’re planning to vacuum your room: o Marginal benefit What you gain from action Carpet is clean o Marginal cost What you lost from action Vaccuming takes time and effort 5.) Trade Markets o Bring buyers & sellers together to exchange goods and services Ebay, Amazon, craigslist, etc Trade o Voluntary exchange of goods and services Competitive Advantage o Situation in which individual can produce at lower opportunity cost than competitor Always gains from trade
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