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lectureOutline01 - Introduction to Economics Topic 1 First...

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ECO 100 W. G. Wolfson Slide 1 ECO 100Y Introduction to Economics Topic 1: First Principles Source: LR12, LR11, LR10: Chapter 1; Skim Chapter 2 Topic 1: First Principles ECO 100 W. G. Wolfson Slide 2 What is Economics? Economics is the science that studies how resources are used in order to satisfy human wants or needs Resources are characterized for being scarce and human wants for being unlimited There are 3 main categories of resources: Natural (land, minerals, water, etc.) Human (mental and physical) Capital (tools, machinery, buildings, etc.) Topic 1: First Principles 1 2
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ECO 100 W. G. Wolfson Slide 3 Commodities / Production / Consumption Resources are used to produce commodities (i.e., goods and services ) Resources used in production are called factors of production (inputs) Commodities are produced in order to satisfy human needs Human needs are satisfied through the consumption of commodities Topic 1: First Principles Major Economic Questions What commodities will be produced? How will commodities be produced? For whom will commodities be produced? (i.e., who gets to consume the commodities?) Is there growth in the economy? Are resources idle ? Is the (average) price level stable ? ECO 100 W. G. Wolfson Slide 4 Topic 1: First Principles 3 4
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ECO 100 W. G. Wolfson Slide 5 Microeconomics and Macroeconomics Microeconomics studies the decisions of individual households and firms e.g., determination of the price and quantity of apples in the market for apples Macroeconomics studies the economy as a whole e.g., the determination of the price level and total output for the economy as a whole Topic 1: First Principles Economic Systems Market-based Buyers seeking lowest price; sellers seeking highest Buyers, sellers interact; resolution (equilibrium) reached Markets for commodities consumers want to buy Markets for factors firms need in order to produce Firms earn revenues from selling commodities Households (consumers) earn incomes by selling factors Money exists as a medium of exchange Orderly framework established by government
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