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Econ 101 Chapter 1 Notes

by: Alexis Holmes

Econ 101 Chapter 1 Notes Econ 101

Marketplace > Iowa State University > Economics > Econ 101 > Econ 101 Chapter 1 Notes
Alexis Holmes
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Fatcors of Production, Basic definitions
Principles of Economics: Microeconomics
Class Notes
Macroeconomics, Econ, Microeconomic




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This 3 page Class Notes was uploaded by Alexis Holmes on Thursday September 1, 2016. The Class Notes belongs to Econ 101 at Iowa State University taught by Elobeid in Summer 2016. Since its upload, it has received 4 views. For similar materials see Principles of Economics: Microeconomics in Economics at Iowa State University.


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Date Created: 09/01/16
Economists are fortune tellers for policy makers, they provide predictive info to base  policies off of.  Economics: Social science studying the choices individuals in a society makes to combat scarcity and incentives that influence those choices  What, How, & for whom are goods/services produced? o What: Agriculture, Manufactured Goods, Service  o How: Factors of production; Land*ALL natural resources*, Labor *time, effort,  productivity  (your production/1hr), and quality*  , Capital*EVERYTHING physical  used to produce  goods and services*, & Entrepreneurship *organizes factors of  goods/services* o Whom: Us = Households *Dependent on income of the people who earn; Labor  earns rent, Labor earns wages, capital earns interest, entrepreneurship earns profit   When do self­interest *best for me*made choices also promote choices made in  social interest *benefits society*? Dependent on efficiency *Bettering one by  putting another at a disadvantage* and equity *debatable fairness*  Self­interested choices promote the social interest if they lead to an outcome that is the best for society as a whole., An outcome that is best for society as a whole  uses resources efficiently and distributes goods and services equitably among  individuals. Resources are used efficiently when goods and services are  produced at the lowest possible cost, and in the quantities that give the greatest  possible benefit. Scarcity: Inability to get everything desired; limited supply unlimited demand   Scarcity forces choice, choice needs incentive. Incentive: A reward to encourage an action, or a penalty to discourage an action Microeconomics: Study of the choices of individuals and businesses and the impact/influence of those choices in markets Macroeconomics: Study of the actions/performance of national and global economies Goods/Services: Objects people value and produce to satisfy human wants.  Goods: physical tangible objects  Services: Acts/tasks of value that people perform Choice = Tradeoff : Giving up one thing to obtain something else. If you choose Choice X you  lose Choice Y. Rational Choice is made by an individual deciding which choice’s benefits outweigh the cost  for themselves. No one else can determine the rationality of another’s choice Benefit = Gain/Pleasure, Cost = Loss Choice at the Margin: Do I get one more, one less, or do nothing? Not an all or nothing  decision, rate the alternatives. Making a choice based off the comparison of benefits to costs of  the change that would be made. Entire benefit minus Marginal benefit. Marginal Benefit vs Marginal Cost Incentive changes Marginal Cost/Benefits, Incentive balances  Positive Statement: A *What is* Statement stated as a fact that can be tested to see if its valid  or invalid. “Increase in gasoline taxes will increase gas prices, and encourage people to  purchase smaller cars” Normative Statement: A*What ought to be* Statement stated as an opinion that can­not be  tested (formation of policy) “We should increase gasoline taxes” An economic model is a situation of the economic world that includes only those features  needed for the purpose at hand. The blueprint, the simplified issue. The outline of the Economy.  How do you define the difference between efficiency and rationality.  .


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