01 Introduction notes

01 Introduction notes - Introduction 2/17/11 11:55 PM...

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Introduction 2/17/11 11:55 PM September 2, 2010 : Why is it there’s so much confusion? Why don’t economists know what to do? Why economists disagree + don’t know what to do o Economy is a social science: study of individual behavior o Differences in ideas about how economy works: different models, assumptions We don’t all behave rationally (impulse purchases), but economic models assume that People respond to incentives o Differences in values Left and right: may agree on issues, but may not agree on what to do about it i.e. Big and small government The BIG Picture o Scarcity Time Spending power o Unlimited wishes exceeding available resources mean we have to make choices o Opportunity cost : The TRUE cost of any choice we make is everything we must give up when we take that action You pay the PRICE (monetary value), not the COST o The Production Possibilities Frontier A graph that shows the combinations of two goods that can be produced given available resources and available
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01 Introduction notes - Introduction 2/17/11 11:55 PM...

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