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ECN_203_1_Overview

ECN_203_1_Overview - a whole(aggregates or totals How do we...

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Chapter 1: Overview
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What is Economics/ Why Study It? Economics -- study of how individuals, businesses and societies manage scarce resources (study of choice and decision making). Scarcity ( Fundamental Concept )-- resources are finite or scarce , especially relative to wants and needs. Optimal Allocation -- best use of resources (more details later)
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Opportunity Cost (Cost of Choosing) Opportunity Cost -- The cost of pursuing a given choice or decision, it’s the next best alternative. Every decision is an economic decision and all have an opportunity cost. Your opportunity cost for coming to class today?
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Two Main Branches of Economics Microeconomics -- The study of economic decisions of individuals and firms (businesses). Macroeconomics -- The study of
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Unformatted text preview: a whole (aggregates or totals). How do we study Economics? Develop models to make predictions.-- Circular Flow Model Economy-- the system of production, allocation and consumption of goods and services in a geographic region or nation. Free-market economy : households and firms are free to make own choices. CIRCULAR FLOW PRODUCT MARKETS FACTOR MARKETS HOUSEHOLDS FIRMS $ $ $ $ LABOR PRODUCTS SERVICES FACTORS PRODUCTS SERVICES LABOR FACTORS Economic Models Evaluation of a model depends on its underlying assumptions. Most models start with simplifying assumptions. Try to “relax” the assumptions to make model more realistic. Ceteris Paribus-- An assumption of “other things being equal.”...
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