Chapter 1

Chapter 1 - Chapter 1: What Economics is About Scarcity-...

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Chapter 1: What Economics is About Scarcity - when wants exceed our ability to satisfy. A condition faced by living creatures since the dawn of time Nog the caveman dreams of sitting in a cave full of meat, but it takes too long to make the number of arrows needed. Several investment banks are allotted a designated portion of an IPO for selling to retail customers, creating a backlog of orders. Thought the study of society’s response to scarcity, the field of Economics is born Economics - The science of dealing with wants greater than the resource available to satisfy Within the broad label of economics, there can be some dividing lines Positive vs. Normative Economics Positive economics focuses upon that which actually is Study based upon observable and tested phenomena Cause and Effect: EX Based upon collected data, we know sales will rise 10% if prices are lowered 5% Emphasis on reality, not opinion of conjecture Normative Economics is concerned with what should be Theories, ideas, opinions Study concerned with advancing ideals and values More philosophical than empirical Ex: no one should pay more than 25% of their earnings in taxes; “why”; because any more than that goes against the idea of small government and a dynamic free market Microeconomics vs. Macroeconomics Microeconomics is concerned with the primary elements of an economy; that is, an individual, a firm, a particular industry, or specific market Individual (referred to as consumer) level economics activity Individual firm’s behavior- “The Firm” is generic term for a single business unit Industry of similar firms Single markets, comprised of individuals or firms within a similar business sector Macroeconomics studies the economy as a whole, firms and individuals reacting to scarcity in collective sense The economy at large; the nation’s economy; world economic growth An economic market not subdivided into industry groups
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This note was uploaded on 11/03/2009 for the course ECON 2000 taught by Professor Roussell during the Fall '06 term at LSU.

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Chapter 1 - Chapter 1: What Economics is About Scarcity-...

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