ppt-intro to microeconomics

ppt-intro to microeconomics - Chapter 1: What is Economics?...

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Chapter 1: What is Economics? Objectives: Define economics and distinguish between microeconomics and macroeconomics Explain the two big questions of economics Explain the key ideas that define the economic way of thinking Explain how economists go about their work as social scientists
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Chapter 1: What is Economics? “Want is the growing giant whom the coat of Have was never large enough to cover” Ralph Waldo Emerson, The Conduct of Life, 1860
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Definition of Economics Our inability to satisfy all our wants is called scarcity . Because we face scarcity, we must make choices . The choices we make depend on the incentives we face. An incentive is a reward that encourages an action or a penalty that discourages an action (e.g., tuition assistance and pollution taxes).
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Definition of Economics Economics is the 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.
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Definition of Economics Microeconomics Microeconomics is the study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments on those choices (the trees). Macroeconomics Macroeconomics is the study of the performance of the national and global economies and the effects on those economies of the choices that individuals, businesses, and governments make (the forest).
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Two Big Economic Questions 1. How do choices end up determining what , how , and for whom goods and services get produced? 2. When do choices made in the pursuit of self-interest also promote the social interest ?
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Two Big Economic Questions What, How, and For Whom? What goods and services will be produced? What we produce changes over time. Seventy years ago, almost 25 percent of Americans worked on farms. Today that number is 3 percent. Seventy years ago, 45 percent of Americans produced services. Today, almost 80 percent of Americans have service jobs.
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Two Big Economic Questions Figure 1.1 shows the trends in what the U.S. economy has produced over the past 70 years. Economics explains these trends and answers the what question.
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Two Big Economic Questions How will the goods and services be produced? Goods and services are produced by using productive resources that economists call factors of production . Factors of production are grouped into four categories: Land Labor Capital Entrepreneurship
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Two Big Economic Questions The “gifts of nature” that we use to produce goods and services are land . The work time and work effort that people devote to producing goods and services is labor . The quality of labor depends on human capital , which is the knowledge and skill that people obtain from education, on-the-job training, and work experience. The tools, instruments, machines, buildings, and other
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ppt-intro to microeconomics - Chapter 1: What is Economics?...

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