Core Microeconomics Chapter 1

Represents all the goods and services produced annually

The decision making by individuals, businesses, industries, and governments

The broader issues in the economy such as inflation, unemployment, and national output of goods and services

Economic analysis can be usually applied to topics as diverse as how businesses make decisions, how college students allocate their time between studying and relaxing, etc. While economics is separated into two broad categories

Assumption used in economics, where other relevant factors or variables are held constant/equal (For example, holding monthly income constant but changing the price of a product); economics creates simple models that hold all other relevant factors constant

How well resources are used and allocated. Do people get the goods and services they want at the lowest possible resource cost? This is the chief focus of efficiency

Occurs when goods are produced at the lowest possible cost

Occurs when individuals who desire a product the most (as measured by their willingness to pay) get those goods and services

The fairness of various issues and policies (when just a few people earn nearly all of the income and control nearly all of societies wealth, most people agree that this is unfair)

Our unlimited wants clash with limited resources, leading to scarcity (rich and poor) because, at a minimum, our time is limited on earth. Economics focuses on the allocation of scarce resources to satisfy unlimited wants

What you give up to do something or purchase something. (for example, to watch a movie at a theater, there is not just the monetary cost of the tickets, but the time involved in watching the movie) You could have been doing something else

Choice and scarcity force tradeoffs
Opportunity costs dominate our lives (everything we do involves oppurtunity costs)
Rational behavior requires thinking at the margin
People follow incentives
Markets are efficient (increases competition at lower prices)
Government must deal with market failure (like pollution)
Information is important
Specialization and trade improve our lives
Productivity determines our standard of living
Government can smooth the fluctuation in the overall economy

Time series, scatter plots, pie charts, and bar charts

Involve plotting time on the horizontal axis and the value of some variable on the vertical axis *

Graphs where two variable (neither variable is time) are plotted against each other *

Show date that can be split into percentage parts that combined make up the whole *

Use bars to show the value of specific data points *

The curve is a straight line (ex. for every hour studied, GPA increases by .1) *

Slope = rise/run *

More realistic than linear, there is a curve in the graph (ex. first hours of studying results in greater improvements to GPAs than further studying hours; exhibits what experts call diminishing returns)*

Computing the slope at point a requires drawing a line tangent to that point then compute the slope for that line *

Y=a+bX where Y is the variable plotted on the y axis and a is a constant (the vertical intercept so when X is zero) and b is a different constant multiplied by X, the value on the x axis (ex. using average study hours per week to figure out GPA, .1 increase of GPA per hour starting with a GPA of 1.0, looks like GPA=1.0+.1Hour per week) *

The relationship between two events that are occurring at the same time is ambiguous. The fact that they are happening together (correlation) does not mean that one caused the other (causation)