lectur5-page2 - Then again “Mister how much is this?” I...

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2 2 Economics is a Way of Thinking, a Thought Process You already know and use some of the economic principles we will discuss u Your informal economic education began when your parents gave you your first dollar to spend u You had to choose the combination of economic goods and services (commodities) to buy, that would give you the greatest satisfaction (utility) When you were younger and learning about the concept of money from your parents, they probably gave you a dollar one day to buy what you wanted to purchase in a store. I used to help a friend out in the evenings at a convenience store in Cary, N.C. when I first started teaching at N.C. State. Young children would come into the store and go right to the candy counter. They clutched their four quarters tightly in their little hands, and would stare at that candy trying to figure out what they wanted and how much. Then it would start. “Mister, how much is this?” I would tell them, and they would put the candy back down.
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Unformatted text preview: Then again, “Mister, how much is this?”. I would tell them, and they would put it back down. “Mister, how much is this?” This question and answer session would go on for several minutes until junior figured out what he/she wanted for their dollar. What were those youngin’s doing? Well, they had a budget constraint, the four quarters in their little hands. They were trying to figure out the combination of candy that they could buy with their dollar that would give them the biggest belly ache they could get. Seriously, they were selecting the combination of economic goods they could buy, subject to their budget constraint, that would give them the most utility. Do we do anything radically different now that we have all grown up? I don’t think so. Our budget constraints are larger and our “toys” and “candy” are more expensive; but the process we go through is basically the same....
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