Microeconomics Notes with Important Terms and Graphs
Introduction
Foundations
Basics
Language of economics
Fundamental problem facing mankind
“Our resources are limited (scarce), but our wants (aspirations to good life , ambitions , needs, dreams) are unlimited.”
SCARCITY = Budget Constraint
Proof Resources Limited * Time: 24 hours day * Time is money * 20 hours in bed (leisure) * Safe drinkable water = Less than 1% of total water * $2000 apt/studio, cook own food * $2000000 a month * Mansion * Personal Cook * Personal Bodyguard * House Maintenance
Resources are limited
- There is a limit to how much one can achieve, produce, consume
Solution: How to raise living standard? * Become Chinese (average salary in china < US) * Live in caves (Still have 24 hours) * Efficient choices / Management of scarce resources ✓
Economics = the study of how humans (society) manage the scarce resources.
All are subject to economic analysis because of scarce resources
All are subject to economic analysis because of scarce resources
Issues * College Education (Subject to economic analysis) * Church (Subject to economic analysis) * Business, Entrepreneurship (Subject to economic analysis) * Election (Subject to economic analysis) * Size of US family is down. * Romance + Marriage
Given Scarcity
More on one activity
More on one activity
Tradeoff
Less on the rest
Less on the rest
Opportunity Cost * No free lunch! * Any choice => “Cost” * Opportunity cost = best alternative lost, sacrificed, given us as we make decisions. * Opp. Cost -> Full cost of college (BA -> 4 Years) * Explicit Cost ($) Tuition, books, supplies = $20,000 a year. * Hidden Cost (Implicit) -> Lost Earnings -> $25,000 * Stress + Anxiety -> Health Management -> $5000
Benefits of college * Private Benefits * Higher Income * $45000 X 40 = 1,800,000
* Public
Foundations
Basics
Language of economics
Fundamental problem facing mankind
“Our resources are limited (scarce), but our wants (aspirations to good life , ambitions , needs, dreams) are unlimited.”
SCARCITY = Budget Constraint
Proof Resources Limited * Time: 24 hours day * Time is money * 20 hours in bed (leisure) * Safe drinkable water = Less than 1% of total water * $2000 apt/studio, cook own food * $2000000 a month * Mansion * Personal Cook * Personal Bodyguard * House Maintenance
Resources are limited
- There is a limit to how much one can achieve, produce, consume
Solution: How to raise living standard? * Become Chinese (average salary in china < US) * Live in caves (Still have 24 hours) * Efficient choices / Management of scarce resources ✓
Economics = the study of how humans (society) manage the scarce resources.
All are subject to economic analysis because of scarce resources
All are subject to economic analysis because of scarce resources
Issues * College Education (Subject to economic analysis) * Church (Subject to economic analysis) * Business, Entrepreneurship (Subject to economic analysis) * Election (Subject to economic analysis) * Size of US family is down. * Romance + Marriage
Given Scarcity
More on one activity
More on one activity
Tradeoff
Less on the rest
Less on the rest
Opportunity Cost * No free lunch! * Any choice => “Cost” * Opportunity cost = best alternative lost, sacrificed, given us as we make decisions. * Opp. Cost -> Full cost of college (BA -> 4 Years) * Explicit Cost ($) Tuition, books, supplies = $20,000 a year. * Hidden Cost (Implicit) -> Lost Earnings -> $25,000 * Stress + Anxiety -> Health Management -> $5000
Benefits of college * Private Benefits * Higher Income * $45000 X 40 = 1,800,000
* Public