Course Notes - ECO1102 B don't email he probably won't...

ECO1102 B
don't email he probably won't answer. ask him after class or ask a TA or office hours (TBD)
Evaluation
Midterms : 3 x 15% M/C only
Assignment: 10% released during reading week. Final: 45% all topics, M/c only sample exam questions
with answers will be provided online along with several past-year examinations hopefully with answers
(hopefully with correct ones)
- never trust answers or information
Chapter 1
LO
1. Learn that economics is about allocation of scarce resources
2. Examine some of the tradeoffs that people face
3. Learn the meaning of opportunity costs
4. See how to use marginal reasoning when making decisions
5. Discuss how incentives affect people's behavior
6. Consider why trade among people or nations can be good for everyone
7. Discuss why markets are a good, but not perfect, way to allocate resources
8. Learn what determines some trends in the overall economy
Ten Principles of Economics Economy
- Greek word for "one who manages a household"
Households & economies
1. who will work?
2. What goods and how many of them should be produced?
3. what resources should be used in production?
4. at what price should the goods be sold
Economics - science of efficiency. we have to make choices.
• the study of how society manages it's scarce resources
• the management of society's resources is important because resources are scarce
Scarcity
• Society o has limited resources
o cannot produce all the goods and services people wish to have
Ten Principles of Economics
How people make decisions (microeconomics)
our focus is almost exclusively on efficiency
1. People face tradeoffs
• there is no such thing as a free lunch
• to get something, we usually have to give up something else
• guns v. butter
• food v. clothing
• leisure time v. work
• efficiency v. equity

• Efficiency: society gets the most that it can from its scarce resources you have a certain quantity of resources
(which are used to produce goods and services)
• Equity: the benefit of those resources are distributed fairly among the members of society
• resources: labour, land, capital --> these are known as passive resources, they are not decision makers as
such.
a. labour - passive
b. land - passive
c. capital - passive
c.i. physical capital (machinery
c.ii. human capital (knowledge )
d. entrepreneurial spirit - what decides what will be produced &how - not passive
 making decisions requires trading off one goal against another
 some people are better at some things than other things. Given that we can't do everything we
want we have to decide what is best for us- what will maximize our economic wellbeing.
2. the cost of something is what you give up to get it
• Decisions require comparing costs and benefits of alternatives
• whether to go to college or to work
• whether to study or go out on a date
• whether to go to class or sleep in  opportunity cost of an item
• what you give up to obtain that item, what you forego in order to obtain this item or do this thing. which one is
the most satisfying alternative? the best alternativ