Chapter 1 - (We have scarce resources and need to figure...

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Chapter 1: Introduction to Economics Economics : The study of the choices people make in a world of scarcity Scarcity : Limited nature of resources, Arises b/c wants exceed the available resources (Ex: Land, natural resources) Choice : To select freely and after consideration -- Levels of Scarcity Individual Time , Each of you have limited time, allocate (Ex: Tonight must decided what to do with your evening) Income , Every dollar you spend on clothes is a dollar you cannot spend on beer Bottom Line: We all make Trade-Offs Trade-Offs : Giving something up to get something else -- What can economics do? 2 Types! 1) Positive : What is? What will be? (Ex: An increase in gas tax will decrease the quantity of gas purchased) 2) Normative : What ought to be? (Ex: Should the government raise the gas tax?) -- Organizing Economics- Rules of the Game Any interaction is a game
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Unformatted text preview: (We have scarce resources and need to figure out how to allocate them) 1. Who are the economic agents? a. Consumers b. Producers c. Government 2. What resources need/have for production? a. Raw Materials/Capital b. Physical Capital (Machines) c. Labor d. Human Capital (Education, Skills) e. Entrepreneurship 3. How are goods and services allocated organized? Centralized Economy : A central planner(s) decided the best way to allocate resources (who consumes, who produces and how much). Market Economy : An economy that allocates resources through decentralized decisions of many firms and households. 4. Markets Typical Characteristics : 1. Voluntary and mutually beneficially exchange 2. Money (median of exchange) 3. Specialization and division of labor 4. Well defined property rights (legal system)...
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This note was uploaded on 12/10/2011 for the course ECON 221 taught by Professor Williamson during the Winter '05 term at Cal Poly.

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Chapter 1 - (We have scarce resources and need to figure...

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