BA_315_LN_1_Introduction_to_Economics

BA_315_LN_1_Introduction_to_Economics - Introduction to...

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Introduction to Economics Lecture Notes #1 BA 315: Economy, Industry, and Competitive Analysis Source: Schiller Chapter 1 Edited by Ali Emami Department of Finance Charles H. Lundquist College of Business University of Oregon
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Introduction to Economics This lecture introduces the basic building blocks of economics and the operation of markets. It explains concepts, terminologies, graphs, and equations that are essential for the study of economy, industry and competitive analysis . This lecture introduces the production possibility curves and provides discussion on market economies, centralized economies, mixed economies, market failure and government failure. The main emphasis is on the three central questions of economic systems: 1. WHAT are the basic goals of an economic system? 2. HOW does a market economy address these goals? 3. What role should government play in shaping economic outcomes? Concepts you will learn in this lecture Resources Investment Externalities Economics Economic Growth Government Failure Opportunity Cost Market Mechanism Macroeconomics Factors of Production Laissez Faire Microeconomics Scarcity Mixed Economy Ceteris Paribus Production Possibilities Market Failure Resources: Natural Resources, and Man-maid Resources Natural Resources: Land, Water, Forests, Air, Marin lives, Oil and Gas, Minerals Manmade Resources: Physical equipments and tools (physical capital), Research and Development (R&D) also known as Human Capital. I. Wants Exceed Resources The economic problem of scarcity exists because society's desires exceed the capability of the resources available to satisfy those desires. II. The Central Problem of Scarcity A. Economics f Definition : The fundamental concern of economics is the scarcity of resources relative to human wants. Economics is concerned with the study of efficient allocation of resources. The task of economic theory is to explain and predict economic behavior.
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B. Opportunity Cost f Definition : The cost of giving up most desired goods and services to obtain something else. C. Factors of Production f Definition : Goods and services are produces by factors of production such as Labor, raw materials, land and physical and human capital. D. Scarcity f Definition : Lack of abundance of resources for production of all goods and services desired by people. III. Three Basic Economic Questions in a Democratic Society A. What to Produce - Because wants and desires exceed resources, we have to decide WHAT people want most and give up production of less desired activities and goods. There are two forces which determine what to produce. First, resource constrains (resource endowments), and second, consumers’ choice for consumption. Production Possibilities: Country’s endowments of factors of production (Labor, capital, land, raw material, technology, etc.) determines all possible combinations of goods that society can produce. That is, it determines the production possibility set, technically referred to as Production Possibility Frontier (PPF) .
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This note was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at University of Oregon.

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BA_315_LN_1_Introduction_to_Economics - Introduction to...

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