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Economics
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The study of the choices people make to attain their goals, given their scare resources
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Scarcity
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When unlimited wants exceed the limited resources available to fulfill those wants.
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Why do choices imply sacrifice something?
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because resources are always scare
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People are rational
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Rational individuals weigh the benefits and costs of each action, given the information available, and choose when benefits exceeds cost.
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True/ False: Consumer and firms consistently respond to economic incentives
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True
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Optional decisions are made at the margin
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Most decisions involve doing a little more or a little less.
Optimal decision is to continue any activity up to the point where Marginal Benefit= Marginal Cost
Optimal decision is to continue any activity up to the point where Marginal Benefit= Marginal Cost
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Every society must decide
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What goods and services will be produced?
How will the goods and services be produced?
Who will receive the goods and services produced?
How will the goods and services be produced?
Who will receive the goods and services produced?
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Types of organization
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Central planned economies
Market economies
-Privately owned firms decide what to produce and how to produce it
-Consumers decide to buy according to their wants.
-Exchanges are produced in the market
Market economies
-Privately owned firms decide what to produce and how to produce it
-Consumers decide to buy according to their wants.
-Exchanges are produced in the market
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Economic Model
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-A simplification of the real world with explanatory power
-It captures only the most important aspects considered to make an economic decision, in order to explain it
-It captures only the most important aspects considered to make an economic decision, in order to explain it
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Microeconomics
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How households and firms make choices, their interaction in markets and the government attempts to influence their choices
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Macroeconomics is the study of
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the economy as a whole
-inflation, unemployment, economic growth
-inflation, unemployment, economic growth
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