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EconNotes - Intro to Econ You me and us Economics is a...

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Intro to Econ 21/01/2008 20:19:00 You, me, and us Economics is a social science Humans are one of the most successful species on earth Human kind is a successful species living in a rich environment The recourses available to all species are limited Problem is that there is an unlimited number of uses for our finite resources Must recognize that as individuals we face the mismatch between the sources  available to us and the potential uses of those resources Scarcity is a fact of life Time is the most limited thing Not all resources are scarce, but also not all resources are equally distributed The average person in Australia can buy $30,000 worth of stuff a year The average person in Zambia can only purchase $1,000 goods and services  Why study economics? Economics is the social science that focuses on the forces that determine  how the resources of the world are allocated Key three questions o What is produced? o How will things be produced?? o How are we distributing these goods and services??/Who is  consuming these goods and services??? Individuals can act in a deliberate way and we can choose how to behave Two Big Relevant Things Choice Scarcity How do people make choices?
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When people have to make choices they make rational choices o RATIONALTY IS A VERY IMPORTANT ASSUMTION OF  ECONOMICS Scarcity -> Inequality -> Tradeoffs -> Choice -> Rationality The idea of institutions Societal norms o Written and unwritten rules that effect everything that we do o We call these unwritten rules “institutions” o Can come through laws and be enforced, or they could be informal  o Institutions influence the way that people make their choices, which it  turn effects economic outcomes o Can we figure out if some institutions are better than others?? o Which institutions are good institutions? Institutions that help you get to good economics outcomes How do we decide if it’s a good economic outcome or a bad  economic outcome? Different institutions do different things to different people How will we figure out if it is good or  bad???????????????????????? Social outcome is the key The idea of efficiency It is really hard to agree  whether or not changing an institution is good or  bad, but its definitely true that we should scrap whatever is wasteful Lets go for efficient economic outcomes that are simply an economic outcome  that cannot be improved upon for either all of the people or that helps  someone without hurting anyone else q How would you go about trying to determine whether specific institutions are good  institutions or bad institutions??
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