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Exam1Slides - Lecture Exam#1 Economics study of incentives using an analytical approach meaning we leave out value(moral issues It is the study of

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1 Lecture Exam #1 Economics – study of incentives using an analytical approach – meaning we leave out “value” (moral) issues. It is the study of how people choose to use their limited resources (land, labor, capital and entrepreneurs) to produce, exchange and consume goods and services. Study of decision making. Economics exists because of scarcity: Decisions have to be made because people have unlimited wants coupled with the problem of scarcity (4 resources: land, labor, capital, and entrepreneur) With every decision (choice) there is an opportunity cost involved. Note: Opportunity Cost = the next, best thing given up. As an aside – the word entrepreneur came into English usage from the French in the mid- eighteenth century, to apply to an arbiter taking advantage of discrepancies in Supply and Demand! Two areas in the study of Economics: Microeconomics – study of individual decisions Macroeconomics – study of overall economy (interaction of all individuals [consumer, firm, and government])
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2 Lecture Exam #1 ALWAYS REMEMBER THOUGH THAT LIFE IS NOT LIVED IN A SINGLE DIMENSION! When we say we want to solve education in K-12 – there is NOT going to be ONE answer to this problem because it is a multiple variable problem!!!! HOW DO YOU SCALE THIS PROBLEM DOWN????
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3 Lecture Exam #1 When making decisions sometimes people will: Frame – Go with familiar Anchor – Use rules of thumb BEST WAY to make decision(s) in Economics is to look at the pro’s and con’s – as simplistic as that sounds it is the most effective because one has to look at the entire picture when making a
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4 Lecture Exam #1 Sometimes we will make decisions and unless we have reviewed the ENTIRE picture we may end up with the problem of UNINTENDED CONSEQUENCES: -Malaria is transmitted to humans through mosquitoes and is a rampant problem in many parts of the world today. As a way to fight malaria, families were provided with a net they could use to protect themselves while sleeping. PROBLEM: They are great fishing nets, and thus the families began to use them to catch fish to feed their families.
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5 Lecture Exam #1 Sometimes the government will intervene in the market because they do not like the market outcomes and will impose: Price ceilings, price flows, make things illegal (impose fines), increase taxes
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6 Lecture Exam #1 Types of Economics: Positive Economics – Present evidence to support what you are saying Normative Economics – Opinions – what ought to be.
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Lecture Exam #1 The economic approach – we use principles of scarcity and rational self interest to search out answers to questions in the “real world”. Theory – Simplification of reality – simplified explanation of the relationship between certain facts. For example, # car accidents = F (speeding)
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This note was uploaded on 02/09/2011 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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Exam1Slides - Lecture Exam#1 Economics study of incentives using an analytical approach meaning we leave out value(moral issues It is the study of

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