1Lecture TopicsDefine economics (it’s about the allocation of scarce resources)Introduce economic basicsScarcity, Choice, CostCost-Benefit PrincipleMarginal Analysis and DecisionsMicroeconomics...Microeconomics...The study of how households and firms make decisions and how they interact in markets.Macroeconomics...The study of economy-wide phenomena, including inflation, unemployment, and economic growth.Scarcity . . .never enough time, money, or energy to do everything we want or have everything we want.Scarce resources:laborlandcapitaltechnologytime
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2SCARCITY SCARCITY ⇒CHOICECHOICEThe existence of scarcity forces us to choose.$35 Oakland$25 Waterfront$10 Benefit??? CostSCARCITY ⇒CHOICECHOICE⇒The cost of something is what you give up to get it. Choosing one alternative over another has a cost associated with it.Opportunity costis the highest valued alternative that must be given