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Unformatted text preview: Principles of Macroeconomics Lecture 1 Thursday August 30, 2007 I. Introduction 1. Ten Principles of Economics (Chapter 1) a. What is Economics? Economics is a science that studies how society allocates or manages its scarce resources in order to solve the economic problem. • It is a science because We observe the world, come up with hypothesis and then theories about how the world works. We have our own language: Phrases, terminology, and we build simplistic models of how we see the real world. • Resources are not abundant. So, it is necessary that we allocate resources efficiently in order to produce what we need. • What is the economic problem? It is the problem that we have been trying to solve since human race appeared for the first time on earth. What to produce? How to produce? For whom to produce? • The key word: INTERACTION. People interact with one another when searching for their own interest. b. How people make decisions 1. People face trade-offs • Efficiency means getting the maximum benefits from the scarce resources • Equity means that those benefits are distributed fairly among society members 2. The cost of something is what you give up to get it2....
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This note was uploaded on 04/07/2008 for the course BSAD ECON 040 011 taught by Professor Boveemora during the Spring '08 term at Vermont.
- Spring '08