ECO 2013 (McConnell v21) - Ch1 with graphic.ppt - ECO 2013 Chapter 1 General overview of the subject ECO 2013 Chapter 1 • Definition of economics –

ECO 2013 (McConnell v21) - Ch1 with graphic.ppt - ECO 2013...

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ECO 2013 Chapter 1 General overview of the subject
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ESC ECO-2013 McConnell V21 nikishin 2 ECO 2013 - Chapter 1 Definition of economics: a social science concerned with how individuals, institutions, and society make optimal choices under condition of scarcity. The economic perspective Scarcity of choice Scarcity of goods and services restricts options and demand choices Since we cannot get it all we must decide what we will have and what we must forgo.
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ESC ECO-2013 McConnell V21 nikishin 3 ECO 2013 - Chapter 1 By making one choice we loose the opportunity of making all other choice and loose the benefits of these other choices The loss of such benefits is the Opportunity Cost Purposeful behavior means that people make decisions with some desired outcome in mind (satisfaction) The desired effect - SATISFACTION is the UTILTY of the decision
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ESC ECO-2013 McConnell V21 nikishin 4 ECO 2013 - Chapter 1 In economy the term "MARGINAL" means "extra", "additional", or "change in". A choice usually leads to a change in the situation. The result of the change is "marginal" to the previous situation because it is "an extra" result. What is gained by "extra result" is called marginal benefit What is lost or spent to obtain the "extra result" is called marginal loss or marginal cost
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ESC ECO-2013 McConnell V21 nikishin 5 ECO 2013 - Chapter 1 Marginal analysis is the comparison between the expected marginal benefit and the expected marginal cost Opportunity lost by making one rather than another choice is called Opportunity cost (What is the opportunity cost being a full time student?) A tested and widely accepted theory in economy is called - economic principle Economic principles are generalizations about tendencies in people's economic behavior and the "behavior'' (changes and reactions) of the economy itself. Example: the relationship between quantity and prices in economy.
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ESC ECO-2013 McConnell V21 nikishin 6 ECO 2013 - Chapter 1 In constructing theories and assumptions in economics the general principle of scientific
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