Notes - Econ 2030 Notes Fall 2009 A The Basics 1 Economics...

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Econ 2030 Notes Fall 2009 A. The Basics 1. Economics - An organizing principle where the study of how societies prevision themselves with the material means of existence. The study of how human beings coordinate their wants and desires, given the decision making mechanisms, social customs, and political realities of the society. How societies go about providing themselves with the stuff of life Not about everything we do Every choice we make is done in the face of scarcity ( we don’t have infinite time or resources. o the goods available are too few to satisfy everyone’s desires) o scarcity has 2 elements: our wants our means of fulfilling those wants wants are changeable and partially determined by society( live in country vs. city= different wants). Focuses on material needs of existence Looks at the costs and benefits of things 2. Econ follows 4 questions a. WHAT material things/goods we should produce. What to provision ourselves with. o Exp- produce chairs or tvs? b. HOW will we produce those things? o Produce them by using human labor or machines? c. FOR WHOM- who are we producing these things for? o Producing for adults/kids/rich or poor o Distributed on the basis of lottery/ first come, first serve, price range etc… o This class focuses on markets (see below section). d. CONSEQUENCES- this depends on how we answer the first three questions. 3. Basic Definitions a. Coercion - a way an economy can deal with scarcity. It is the limiting of peoples wants while increasing the amount of work individuals are willing to do to fulfill those wants. b. Markets - It’s a social relationship between a consumer and a supplier where material things (goods/services) are exchanged for money. It’s not always a physical place. c. Micro economics- small, individual. Economic decisions made by people d. Macro economics - focuses on society as a whole and not just individuals. Is about 3 things o Unemployment- jobs o Economic growth – producing more stuff in 1 period compared to the previous o Inflation- how prices of everything changes 4. Economic reasoning Opportunity cost - the next best thing, you give up in order to do something. o Exp- go to class, you gave up sleeping in o Every action we make involves cost. Everything we do has an opportunity cost. o It involves more than just money. It also includes non-monetary things such as time and effort o It is NOT everything given up, just the next best thing Rationality - individuals are rational and do what is perceived to be the best choice for them when the choice is made o Still rational choice even if not what you wanted or the outcome you wanted o Exp- go to a movie and after watching it you can’t believe you wasted money on such a horrible movie. This does not mean the choice wasn’t rational because at the time you chose to see the movie based on how good the ads for it were, it was a rational choice.
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Margin - the edge/boundary o 2 main categories of choice we make 1.
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