1 - 1 TOPIC 1 Introduction to Economics 2 TOPIC 1 WHAT IS...

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Unformatted text preview: 1 TOPIC 1 Introduction to Economics 2 TOPIC 1 WHAT IS ECONOMICS? THE COST-BENEFIT PRINCIPLE OPPORTUNITY COSTS NORMATIVE VS POSITIVE ECONOMICS MICRO VS MACROECONOMICS THE PRODUCTION POSSIBILITIES FRONTIER (PPF) 3 EXAMPLE What is the Optimal Class Size of Introduction to Economics? 4 EXAMPLE Observations- smaller class size produces better education outcome- however it is also more expensive- A class of 300 students might cost $200/student - A personal tutorial course in economics might cost $40,000 per student 5 EXAMPLE The tradeoff- better education quality comes at the cost of lower affordability of education The best class size according to education psychologists will differ from that according to economists 6 SCARCITY The Scarcity Principle Boundless wants cannot be satisfied with limited resources. Therefore, having more of one thing usually means having less of another. Because of scarcity we must make choices. 7 SCARCITY Examples of Scarcity 1. roads in big cities 2. oil reserves in the world 3. clean air and water in many countries 4. time Exercise: think of three examples of scarcity in your daily life 8 WHAT IS ECONOMICS Economics The study of how people make choice under conditions of scarcity and the incentives that influence and reconcile those choices. 9 THE ECONOMIC WAY OF THINKING The Cost-Benefit Principle An individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs Politicians who promise better schools, better hospitals, , but never mention a word of cost 10 EXAMPLE Say you can buy lunch either on campus or off campus. They taste the same. Lunch on campus costs $25; lunch off campus costs $15, but it takes you half an hour to make the trip....
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1 - 1 TOPIC 1 Introduction to Economics 2 TOPIC 1 WHAT IS...

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