Econ - Econ 16:40 Monday,August22,2011...

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Econ 16:40 Monday, August 22, 2011 Economics – study of economies The study of how societies provision themselves with the material means of existence. Physical materials, services What are the materials? How are we going to provision ourselves? Labor, technology etc For whom are we producing? Consequences of behavior of individuals, companies, etc Wednesday, August 22, 2011 Practice problems: Chapter one, 6-12 16-18 21 Chapter two, 1 2 4-8 10 Economic reasoning:  Opportunity cost To do something, you must also give up something The margin
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How many choices Decisions on a small level, how many classes to take etc. Rationality When making decision, opt for which we  think  is most beneficial Examples: Either/or choice Part one Either go to the already paid for concert, or go to the free concert Yes, if the benefit is at least as great as the cost No, if the cost is at least as great as the benefit If equal, you are choosing the best option no matter what you choose Benefit vs. cost B: perceived benefit of the house of blues show C: perceived benefit of the free show No matter what, must pay the cost of the ticket. It is not a relevant cost. Part two Either go to the house of blues and buy the ticket, or go to the free show B: perceived benefit of the show C: perceived benefit of the free show, plus the cost of the ticket How much/how many choises Sunk cost: irrelevant, there is a cost no matter which option you choose. Go into a  buffet, already paid, can’t get refund if you don’t like the food The answer Marginal decision: delta taking flights a day from 7 down to 6 Choice between a profitable decision and a more profitable decision Positive vs. normative economics Positive: descriptive, this is how it is Normative: prescriptive, based on values, good or bad The difference: positive statements can be tested, normative cannot be tested Can we test it to see if it’s true or false?
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16:40 Practice problems
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16:40 Chapter 2: 1, 2, 4-8, 10
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Econ - Econ 16:40 Monday,August22,2011...

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