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BAFB1023 Topic 1 Intro to Microeconomics - MICROECONOMI CS...

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MICROECONOMI CS Topic 1 Introduction to Microeconomics
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What is Economics? Definition of Economics Scarcity and Choice The Economic Questions Production Possibilities Frontier Opportunity Cost The Difference Between Microeconomics and Macroeconomics Key Terms
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Definition of Economics Economics is a social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. Choices - To choose among the available alternatives Scarcity – our inability to satisfy all our wants; faced with scarcity we must choose among the available alternatives.
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Definition of Economics Scarcity forces us to make choices among a limited set of possibilities Study the logic of rational choice among competing alternatives Under scarcity, deciding to have more of one good or service means deciding to have less of something else. The relevant cost of a decision is the value of the best alternative foregone
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Needs vs. Wants Needs – what people must have to live. Food Clothing Shelter Wants – the things we would like to have, but can live without.
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The Difference Between Microeconomics and Macroeconomics Microeconomics: The study of the choices that individuals and businesses make, the way these choices interact in markets, and influence of governments Macroeconomics: The study of the performance of the national economy and the global economy
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7 Macroeconomics vs. Microeconomics MICROECONOMIC QUESTION MACROECONOMIC QUESTION Go to business school or take a job? How many people are employed in the economy as a whole? What determines the salary offered by Citibank to Cherie Camajo, a new Columbia MBA? What determines the overall salary levels paid to workers in a given year?
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8 Macroeconomics vs. Microeconomics MICROECONOMIC QUESTION MACROECONOMIC QUESTION What determines the cost to a university or college of offering a new course? What determines the overall level of prices in the economy as a whole? What government policies should be adopted to make it easier for low-income students to attend college? What government policies should be adopted to promote full employment and growth in the economy as a whole? What determines whether Citibank opens a new office in Shanghai? What determines the overall trade in goods, services and financial assets between the US and the rest of the world?
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The Economic Questions What, How and For Whom? What goods and services get produced and how much ?
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