ECON 1102 Ch 1 Notes
ECON 1102 Ch 1 Notes ECON 1102
Popular in Microeconomic Principles
Popular in Economics
This 2 page Class Notes was uploaded by Diana Oborna on Monday August 29, 2016. The Class Notes belongs to ECON 1102 at Temple University taught by John DiLeonardo in Fall 2016. Since its upload, it has received 4 views. For similar materials see Microeconomic Principles in Economics at Temple University.
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Date Created: 08/29/16
ECON 1102 Chapter 1: What is Economics? Economics: social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. Microeconomics: the study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments. Macroeconomics: the study of the performance of the national economy and the global economy. Goods and services (g/s): the objects that people value and produce to satisfy wants. (physical objects versus tasks performed for people) Factors of Production: Land: natural resources that we use to produce g/s; includes land, minerals, oil, gas, water, air, forests, and fish o Earns rent Labor: work time and work effort that people devote to producing g/s; includes physical and mental efforts of people who work o Quality of labor depends on human capital (the knowledge and skill that people obtain from education, on-the-job training, and work experience; can increase or decrease over time) o Earns wages Capital: tools, instruments, machines, buildings, and other constructions that businesses use to produce g/s o Financial capital consists of stocks and bonds for example; not used to produce g/s nor is it a factor of production however, it does play a role in enabling businesses to borrow funds used to purchase physical capital o Earns interest Entrepreneurship: human resource that organizes labor, land, and capital; entrepreneurs drive economic progress by developing new ideas about what and how to produce, make business decisions, and bear the risks that arise from said decisions o Earns profit Self-interest: the choice you think is the best one available for yourself Social interest: a choice or outcome that is best for society as a whole Issues that raise questions about social interest o Globalization: the expansion of international trade, borrowing and lending, and investment o Information-age monopolies: technological change of the past 40 years o Climate change: result of pouring billions of tons of carbon dioxide emissions into the atmosphere a year on the global climate o Financial instability: The Great Recession for example Efficiency: when the use of a resource cannot make someone better off without making someone else worse off (a situation that can’t be improved upon) Tradeoff: an exchange; making a choice means we are selecting from the available alternatives Rational choice: a choice that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice Benefit: the gain or pleasure that something brings and is determined by preferences (a person’s likes and dislikes and the intensity of the feelings) Opportunity cost: the highest forgone alternative Can be an all or nothing decision Can involve choosing how much of an activity to do o This decision can be made at the margin (comparing the benefit of a choice with its cost) o Marginal benefit is therefore the benefit that arises from a one unit increase in an activity o the opportunity cost of an increase in an activity is the marginal cost Positive statement (what is) versus normative statement (what ought to be) Economists make this distinction in order to discover how the economic world works Economic model: description of some aspect of the economic world that only includes the necessary features for the given purpose
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