Chapter 1 Notes- Economic Thinking
Chapter 1 Notes- Economic Thinking ECO 2013
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This 2 page Class Notes was uploaded by Lana Notetaker on Friday September 4, 2015. The Class Notes belongs to ECO 2013 at Florida State University taught by Joseph Calhoun in Fall 2015. Since its upload, it has received 64 views. For similar materials see Macroeconomics in Economcs at Florida State University.
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Date Created: 09/04/15
Macroeconomics Chapter 1 Notes 82883192 0 History Mechanisms used to deal with scarcity gt Force Wars land fought for militia forces gt Tradition emphasized past ways from families and culture genderfamily roles and inherited land gt Authority government and church laws in uences etc gt Market increasing reliance on market regulation gt Combination of all of the above Scarcity and Tradeoffs gt Scarcity requires that some wants remain unful lled gt Issues of equity justice and fairness are embedded with scarcity distribution of goods and services in relation to demographics and ethics gt Do not confuse the market process as being the same as politically conservative 0 The Economic Way of Thinking gt Things are not always what they appear to be gt Economic guidelines in thought process 1 There are always tradeoffs What you give up is your opportunity cost value of next best alternative Opportunity cost is NOT the sum of everything you give up quotThere is no such thing as free lunchquot Individuals choose purposefully economizing behavior trying to get the most bene ts for the least cost or effort make choices in rational behavior in selfinterest Incentives matter As the incentive goes up you will be more likely to do something or try to and vice versa Incentives do not have to be money Think on the margin not in total or on average Marginal means additional or incremental ex Marginal revenue is additional revenue Marginal cost is additional cost for adding one unit Rule to live by Continue to engage in an activity as long as the expected marginal bene t is greater than the expected marginal cost More info leads to better decision making but more info is costly to get Refer back to 14 Man choices create a secondary effect The primary effect tis immediate and visible but the secondary effect usually comes later and is not as visible Value is subjective Determined by individual purchaser 8 Economic thinking is scienti c thinking Economists use data and information generated by people to explain and predict actions Economists quotdo it with modelsquot Pitfalls To Avoid in Economic Thinking gt Violation of ceteris paribus all things held constant we want to isolate variables so we typically allow only one to change at a time gt Good intentions do not necessarily result in good outcomes if you have good intentions but ignore secondary outcomes economic thinking scienti c method etc you will end up in bad outcomes gt Association is NOT causation gt Fallacy of composition what s good for the Individual is good for the group making this assumption when it is false is the fallacy