Ch01 - CHAPTER CHECKLIST When you have completed your study...

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When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Define economics, distinguish between micro- economics and macroeconomics, and explain the questions of macroeconomics. 1 Describe the work of economists as social scientists. Explain four core ideas that define the way economists think about macroeconomic questions. Explain why economics is worth studying. 2 3 4
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1.1 DEFINITIONS AND QUESTIONS Economic questions and problems arise because human wants exceed the resources available to satisfy those wants . Scarcity The condition that arises because the available resources are insufficient to satisfy wants. Faced with scarcity, we must make choices —we must choose among the available alternatives. The choices we make depend on the incentives we face.
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JARGON Economics uses jargon a lot Jargon means a special vocabulary Economics jargon can be confusing because it often gives special meaning to ordinary, every day words, that have a different meaning in normal usage ‘Scarcity’ is our first example of a jargon word in economics.
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Why jargon? Jargon allows precision Jargon allows shorter statements Jargon permits more efficient communication It’s standard in economics, so we have to know it to understand economics
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Quote: Joan Robinson [Professor of Economics at U. of Cambridge] “You study economics in order to avoid being fooled by economists” But to do that, we have to learn a lot of definitions and terminology – the jargon of economics.
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Bad aspects of Jargon Jargon can be used to obfuscate or exclude Jargon can be confusing to those who are unsure of it Unnecessary jargon hinders efficient communication rather than helping it
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Economics as a Foreign Language ALL economics and economists use jargon to some extent MOST of economics is common sense Except for a very few non-intuitive ideas, learning economics amounts to learning how to express what you know already in the right jargon, i.e. it is like learning a new language
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1.1 DEFINITIONS AND QUESTIONS Incentive An incentive is a reward or a penalty—a “carrot” or a “stick”—that encourages or discourages an action. Economics The social science that studies the choices that we make as we cope with scarcity and the incentives that influence and reconcile our choices. The subject has two broad divisions—microeconomics and macroeconomics.
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1.1 DEFINITIONS AND QUESTIONS Microeconomics Microeconomics : The study of the economic choices that individuals and organizations make, the way these choices interact, and the influence that governments exert on these choices. Macroeconomics Macroeconomics : The study of the aggregate (or total) effects on the national economy and the global economy of the economic choices
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1.1 DEFINITIONS AND QUESTIONS Macroeconomic Questions The three big issues that macroeconomics tries to understand are: The standard of living The cost of living Economic fluctuations—recessions and expansions
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1.1 DEFINITIONS AND QUESTIONS
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Ch01 - CHAPTER CHECKLIST When you have completed your study...

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