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Unformatted text preview: 1 Chapter 1 Introduction Economics- The Study of Scarcity. The Problem of Scarcity – Unlimited wants and limited resources. Micro vs. Macro Microeconomics focuses on the decisions of the individual (person or firm). Typical variables will be: • Price of an individual good. • Output for a particular firm. • Labor units for the individual firm to hire. • Consumption for a particular individual. Macroeconomics focuses on the decisions of the economy as a whole. Typical variables will be: • Price Level of goods in general. (CPI, PPI) • Output for the entire economy. • Labor for the entire economy. (Unemployment Rate, Total Employment.) • Consumption for all individuals. Factors of Production • Land (T) - earns rent • Labor (L) - earns wage • Capital (K) - earns interest or rental rate • Entrepreneurship - earns profit 2 Useful Definitions • Efficient Markets Hypothesis - Profit opportunities are eliminated almost immediately in an efficient market. • Economic Profit = Accounting profit - Opportunity Cost. • Positive Analysis - concerns itself with explaining how things work and describing the current state....
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This note was uploaded on 10/14/2010 for the course DDF 1124-445 taught by Professor Gorthermclays during the Spring '10 term at Florida College.
- Spring '10