Chapter 1 Notes - Vandan Desai ECON 102Principles of Macroeconomics Chapter 1The Central Idea(Lecture otes Central idea of economicspeople make

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Vandan Desai ECON 102—Principles of Macroeconomics 1 Chapter 1—The Central Idea (Lecture &otes) Central idea of economics —people make powerful choices with scarce resources and interact with other people when they make these choices Economics —study of how people deal with scarcity o All individuals face scarcity in one form or another s Scarcity —situation in which quantity of resources is insufficient to meet all wants o Scarcity forces people to make choices s Choice —a selection among alternative goods, services, or actions Economic interaction —exchanges of foods and services between people Market —arrangement by which economic exchanges between people take place I. Scarcity and Choice for Individuals A. Consumer Decisions i. Budget constraint —limit on amount of money available to spend ii. Choices create opportunity cost of not doing one thing b/c another thing is chosen iii. Opportunity cost —the value of the next-best forgone alternative that was not chosen because something else was chosen iv. Gain from trade —improvements in income, production, or satisfaction owing to the exchange of goods or services 1. Goods/services allocated in ways that are more satisfactory to people 2. Trade permits specialization through the division of labor B. Producer Decisions i. Economic interaction allows for specialization
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This note was uploaded on 10/31/2010 for the course ECON 201 taught by Professor Coomber during the Spring '08 term at Community College of Baltimore County.

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Chapter 1 Notes - Vandan Desai ECON 102Principles of Macroeconomics Chapter 1The Central Idea(Lecture otes Central idea of economicspeople make

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