note - ch1 - Econ 251 Fall 2009 Handout 1 25/08/2009 Class...

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Handout 1 25/08/2009 1 Class &otes Chapter 1 – What is Economics? Outline Definition of Economics Microeconomics The Economic Way of Thinking I. DEFI&ITIO& OF ECO&OMICS Economics = the social science that studies the choices we make as we cope with scarcity , and the incentives that influence and reconcile our choices. s Economics as a social science: We create theories and models we want to test! Obstacles in Economics: 1. We cannot do easily tests and experiments 2. Most economic behavior has many simultaneous causes. Ceteris Paribus means “other things being equal”. s Scarcity Available resources are insufficient to satisfy all wants; Scarcity need to make choices! s Incentives: Rewards (=benefits) or penalties (=costs) that encourage or discourage an action. Ex: an income tax cut provides an incentive to buy more goods If Benefits > Costs take the action! If Benefits < Costs
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This note was uploaded on 09/27/2009 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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note - ch1 - Econ 251 Fall 2009 Handout 1 25/08/2009 Class...

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