Economics 101 notes2

Economics 101 notes2 - Economics 101 notes 16:57:00 What is...

Info icon This preview shows pages 1–3. Sign up to view the full content.

Economics 101 notes 28/01/2008 16:57:00 What is Economics? We live in a world of scarcity. What does this mean? It means that we live in a  world where we cannot have or do everything we want. o Because we live in a world of scarce resources- we cannot have  everything and we cannot do everything- we are forced to make many  decisions and tradeoffs. o Economics : the study of how these and other decisions are made in  the face of scarcity. o Example:  o Everyone in this room made a decision to attend college. This decision  also has cost benefits o o Cost     o -tuition o -books o -stress o -etc o -forgone income-what you could have made if were working instead of  in college- this is a form of opportunity cost.  o Benefits     -Increased income -a better job -Psychic benefits- enjoyable Economic Model: a device used by economists to explain how economic decision  makers allocate scarce resources Economic models usually rely on assumptions .Why do economists rely on  assumptions? o Many features of a particular decision are not important  o Without some assumptions many interactions and decisions are too  complex to analyze o A good model makes sharp, clear predictions about cause and effects  that are consistent with reality o What assumptions does our model of student test taking in econ 101  make?
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Students seek to maximize their test scores Students know that it will not take longer than 4 minutes to write  the answer A 60% chance at 5 points is just as good as 4 points-risk  neutrality – a subtle assumption o o What predictions does our model of test taking in econ 101 make? o Students who believe they have at least a 60 percent chance of getting  the answer right will take the extra time.  o Are these predictions testable? How would you test them? o Net Benefit = 5 * P – 3 > 0 o 5p>3 o P>3/5 Production Possibilities Frontier-  The boundary between those combinations  of goods and services that can be produced and those that cannot. Efficiency:  achieved when we cannot produce more of one good without  producing less of some other good- or be using fewer inputs The production possibility frontier shows all combinations of two goods that satisfy  efficiency Opportunity cost-  The highest value alternative forgone…  Ex.  To get a fish I have to give up some tapioca. This amount of tapioca given up  to obtain one fish is the opportunity cost of one fish.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern