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Econ 100, Week 1 note

by: Jessica Hess

Econ 100, Week 1 note Econ 100

Jessica Hess
GPA 3.78

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About this Document

These notes introduce the basic goals of economics and begin to explore making economic choices.
Economics of Social Issues
Dr. Margaret A. Ray
Class Notes
Opportunity Cost, law of diminishing returns
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This 2 page Class Notes was uploaded by Jessica Hess on Sunday September 18, 2016. The Class Notes belongs to Econ 100 at University of Mary Washington taught by Dr. Margaret A. Ray in Fall 2016. Since its upload, it has received 51 views. For similar materials see Economics of Social Issues in Economics at University of Mary Washington.


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Date Created: 09/18/16
08/30/16 ­ 09/01/16 Economics of Social Issues What is Economics?  Economics is about making choices  Social sciences/human experience  Scare Resources (Land, Labor, Capital)  Models: In this course we will use the simplest forms of models ­Happy face example:              Different levels of complexity and accuracy, but all portray a happy face Assumptions: Assumptions are used in economics to help simplify our models ­Always assume Ceteris Paribas Important people to know:  Adam Smith: Father of Economics. Wrote, “The Wealth of Nations”, 1776. Responsible  for concept of invisible hand.  Alfred Marshall: Father of Micro Economics. Responsible for concept of supply and  demand.  John Maynard Keynes: Father of Macro Economics. Positive vs Normative Economics Positive economics can be tested and proved to be right or wrong. ex: It is 30º outside Normative economics are value judgements and can’t be proved. ex: It is too hot outside How do you know if you made the right choice? ­Evaluate the opportunity cost For any choice, compare the costs and benefits  Goal of a business is to maximize profit o Profit= Total Revenue – Total Cost   Goal of a consumer is to maximize utility o Benefits shout exceed costs To conduct marginal analysis, compare MC (marginal cost) to MB (marginal benefits) According to the Law of Diminishing returns, consumption should be continued until  MC=MB Sunk Cost do not matter when analyzing costs and benefits Vocabulary:   Land: all natural resources above and below ground  Labor: people who are willing and able to work  Capital: tools used to produce goods *not money*  Models: Simplified representations of reality with different levels of accuracy  Theory: The way we think a model should work in reality  Ceteris Paribas: “All other things the same” or only one thing changes at this time  Invisible Hand: When people act freely, the economy as a whole is moves to the best  outcome as though by an invisible hand  Opportunity Cost:  The value of the next best option which is given up   Utility: Happiness gained from choices  Marginal Analysis: how much more output for an additional unit of input  Law of Diminishing Returns: The more you consume something, the less utility you get  Sunk Cost: A cost that cannot be recovered


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