unit 1—introductory materials chapters 1-3 2 weeks
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Unit 1—Unit 1—IntroductoryIntroductoryMaterials Materials Chapters 1-3Chapters 1-3
2 weeks2 weeks
The Nature and The Nature and Methods of Methods of EconomicsEconomicsChapter 1Chapter 1
Economics:Economics:
Social science concerned with how Social science concerned with how people satisfy unlimited wants w/ limited people satisfy unlimited wants w/ limited resources.resources.
Scarcity and choiceScarcity and choice
ScarcityScarcity requires that choices be made requires that choices be made There are always There are always trade-offstrade-offs when when
decisions are madedecisions are made The cost of any good, service or activity The cost of any good, service or activity
is the value of what must be given up to is the value of what must be given up to obtain it = obtain it = opportunity costopportunity cost
Rational behaviorRational behavior
Rational self-interest entails making Rational self-interest entails making decisions to achieve maximum fulfillment decisions to achieve maximum fulfillment of goalsof goals
Different preferences lead to different Different preferences lead to different choiceschoices
Rational self-interest is not the same as Rational self-interest is not the same as selfishness—it guides the economyselfishness—it guides the economy
Marginalism:Marginalism:
= extra, additional or a change in= extra, additional or a change in Each option considered weighs the marginal Each option considered weighs the marginal
benefit against the marginal costbenefit against the marginal cost Whether the decision is personal or one made Whether the decision is personal or one made
by business or gov’t, the principle is the sameby business or gov’t, the principle is the same The marginal cost should not exceed the The marginal cost should not exceed the
marginal benefitmarginal benefit mc < mbmc < mb
Why study Economic?Why study Economic?
For citizenshipFor citizenship
--most political problems have an --most political problems have an economic aspecteconomic aspect
--voters and elected officials can fulfill --voters and elected officials can fulfill their role more effectively if they have an their role more effectively if they have an understanding of economic principlesunderstanding of economic principles
Professional and personal applicationsProfessional and personal applications
--understand TINSTAAFL--understand TINSTAAFL
--develop analytical skills--develop analytical skills
--make intelligent decisions--make intelligent decisions
Economic MethodologyEconomic Methodology
Scientific methodScientific method Theoretical economicsTheoretical economics TerminologyTerminology GeneralizationsGeneralizations Ceteris paribusCeteris paribus
--“other things equal” (one thing at a --“other things equal” (one thing at a time)time)
GraphsGraphs
Our 8 economic GOALS Our 8 economic GOALS (page 9 in text)(page 9 in text)
Economic growthEconomic growth Full employmentFull employment Economic efficiencyEconomic efficiency Price level stabilityPrice level stability Economic freedomEconomic freedom Equitable distribution of incomeEquitable distribution of income Economic securityEconomic security Balance of tradeBalance of trade
MacroeconomicsMacroeconomics
Examines the economy as a wholeExamines the economy as a whole Includes measures of total output, total Includes measures of total output, total
employment, total income, aggregate employment, total income, aggregate expenditures and general price levelexpenditures and general price level
Think of it as examining the forest—not Think of it as examining the forest—not the treesthe trees
MicroeconomicsMicroeconomics
Looks at specific economic unitsLooks at specific economic units Concerned with the individual industry, Concerned with the individual industry,
firm or household and the price of firm or household and the price of specific products and resourcesspecific products and resources
Think of it as examining the trees, not the Think of it as examining the trees, not the forestforest
Positive and Normative Positive and Normative EconomicsEconomics
PositivePositive = describes the economy as it = describes the economy as it actually is, avoiding value judgments and actually is, avoiding value judgments and attempting to establish scientific attempting to establish scientific statements and economic behaviorstatements and economic behavior
NormativeNormative = involves value judgments = involves value judgments about what the economy should be likeabout what the economy should be like --loaded terminology--loaded terminology --biases—preconceptions that are not based --biases—preconceptions that are not based
on factson facts