Econ june exam notes- Soutter

Econ june exam notes- Soutter - Topic 1 Introduction to...

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Topic 1 Introduction to Economics 1.1: Definition of social science and Economics Social Science : The study of society and the way individuals interact within it. Economics : the study of how society employs its scarce resources in the attempt to satisfy infinite wants. 1.2: Definition of Microeconomics and Macroeconomics Microeconomics : The study of individual economic units such as households and firms. Macroeconomics : The study of the economy as a whole. (ie. Inflation) 1.3: Definition of growth, development, and sustainable development Economic Growth : An increase in real GDP or an increase in the quantity of resources. Economic Development : A qualitative measure of a country's standard of living which takes into account numerous factors such as education and health. The Human Development Index is normally used to measure a country's economic development. Sustainable development : The rate at which a country can develop without compromising the needs of future generations. 1.4: Positive and Normative Concepts Normative Economics : Based on opinion. Uses words such as "should". The government should make fixing unemployment its number one priority. Positive Economics : Based on testable theories. For example, a hike in interest rates leads to a fall in aggregate demand can be proven using data. 1.5: Ceteris Paribus . Latin for all things being equal . Since Economics is basically the study of society, we have to understand that there are thousands of variables present, and to control each one of these variables is downright impossible. Thus we make everything else "ceteris paribus" in order to see the effect of one aspect. 1.6: Scarcity Scarcity is the observation that no resource is infinite. Factors of Production: Factors of production are basic components or inputs which are required in the production of goods and services. o Land : Gifts of nature, this includes everything on the land, under the land, or even above the land. Oil is an example. o Labour : The human component hired to assist in producing a good or service. o Capital : Any man-made aid to production. o Entrepreneurship : Combines the other factors and takes risks recongnizing the possibility of gain from employing these
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factors in a specific way, also known sometimes as entrepreneurship. 1.7: The concept of Choice Economics is concerned with the use of scarce resources to satisfy our unlimited wants: Utility : The satisfaction gained from the consumption of a good or service. The demand curve slopes downward because of the law of diminishing marginal utility. The marginal util, or extra happiness, we gain from buying an extra tamogotchi decreases with every tamogotchi we buy at a fixed price. Opportunity cost
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This note was uploaded on 04/05/2012 for the course ECON 10 taught by Professor N.gregorymankiw during the Fall '09 term at Harvard.

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Econ june exam notes- Soutter - Topic 1 Introduction to...

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