CH1 - 9/1/2009 Economics: Models and Foundations 1 4.1...

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9/1/2009 1 Economics: Models and Foundations 1 Scarcity The situation in which unlimited wants exceed the limited resources available to fulfill those wants. 4.1 - Scarce resources and unlimited wants imply the need to make: choices Economics The study of the choices people make to attain their goals, given their scarce resources. Economic mode A simplified version of reality used to Economic model A simplified version of reality used to analyze real-world economic situations. 2
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9/1/2009 2 - Most economics events occur “markets”. - Market A group of buyers and sellers of a good or service and the institution or arrangement by 4.1 Learning Objective 1.1 which they come together to trade. Three Key Economic Ideas 1 People are rational. 2 People respond to economic incentives. 3 Optimal decisions are made at the margin. 3 ` Will Women Have More Babies if the Government Pays Them To? Making the Connection Learning Objective 1.1 4
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9/1/2009 3 Learning Objective 1.1 Three Key Economic Ideas 1 People are rational. 2 People respond to economic incentives Marginal analysis Analysis that involves comparing marginal benefits and marginal costs. People respond to economic incentives. 3 Optimal decisions are made at the margin. Examples : ` How many years of education should you get? ` Should Apple produce more iPods?
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This note was uploaded on 02/22/2010 for the course ECON ECON1002 taught by Professor Rao during the Spring '10 term at HKU.

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CH1 - 9/1/2009 Economics: Models and Foundations 1 4.1...

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