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Economics Notes - Economics Notes Chapter 1 Not being able...

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Economics Notes Chapter 1 Not being able to satisfy our unlimited wants because of our limited resources is called scarcity Because of scarcity, we are forced to make CHOICES which are determined by our INCENTIVES o Incentives are the benefits or penalties which influence our choices Economics: social study which analyzes how people try and cope with scarcity and the incentives they face Microeconomics vs. Macroeconomics Microeconomics: the choices of individuals and businesses and the government influence on these choices Macroeconomics: The global and national effects of the choices made by individuals and businesses. What, for whom, and how goods and services are made and how do self interest promote social interest. (two economics questions ) o What is being produced is always changing because of technology advancements and etc. Factors of productions: the resources used to create goods and services o Land, entrepreneurship, capital, labour o Human capital (knowledge + skills of workers) + Capital ( machines + tools) Tradeoffs- giving one thing to receive another thing (an exchange) o “beer” VS “studying” o Tradeoffs occur when people choose how to spend their money, gov how to spend revenue (what) o When businesses choose alternate technologies (how) o Big tradeoffs- trade between equality and efficiency Choices change how people spend money aka spending habits (to whom) Government redistribution of income to rich and poor families o What, how, and for whom goods and services get produced changes over time. People are deciding how much of their income to use in the present and how much to save for the future. (choices bring change for the future) We face tradeoffs between current consumption and leisure time AND future production, consumption and leisure time. (influences economic improvement) o If we save more, we can buy more capital and increase our production. o If we take less leisure time, we can educate ourselves to become more productive. o If businesses produce less and devote resources to research and developing new technologies, they can produce more in the future. Opportunity cost: emphasizes the cost as the opportunity given up in the trade for another choice Marginal benefits: The benefit from constantly increasing an activity is Marginal costs: The opportunity cost of constantly increasing an activity is
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Margin: people evaluate the consequences or benefits of making constant changes to an activity/resources Many of the choices people make are guided by incentives o If the marginal benefits is higher than the marginal cost; people will see a higher incentive to do more of that activity o If the marginal cost is higher than the marginal benefit; people will not see an incentive and will do less of the activity.
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