Econ 101 Chapter 1 Notes
Econ-Class Notes 9/6
Economics: the study of choice under conditions of scarcity * Scarcity-Choices, resources * Resources: * Land, * Labor, * Capital: physical Plant equipment * Entrepreneurial ability
Microeconomics vs. Macroeconomics
Micro: Behavior of individual actors on the economic scene * Households * Businesses * Government
Macro: total output, total employment, interest rates, economic growth, the aggregate economy, inflation, trade
Mankiw’s 10 General Principles of Economics: 1. People face tradeoffs 2. The cost of something is what you give up to get it 3. Rational people think at the margin- consider benefits and costs 4. People respond to incentives 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Governments can sometimes improve market outcomes 8. A country’s standard of living depends on its ability to produce goods and services 9. Prices rise when the government prints too much money (assuming full employment) 10. Society faces a short run tradeoff between inflation and unemployment
(Purple=Macro)
Scientific Method 1. Observation 2. Economic theory
Economic theory
Assumptions to simplify the problem a. Theoretical model: and abstract representation of reality i. Model should be as simple as possible to accomplish its purpose 3. Testable hypothesis -fields 4. Empirical testing –econometrics b. Ultimate purpose of building a model is to predict behaviors
Econ-Class Notes 9/11
Examples of Models * Supply and demand * Consumer theory * Form theory * Stars circling the earth * Bleeding to cure illness * Maps
Fields of Economics * Markets (bond, stock) * Monetary economics (banking) * International economics * Law & econ (contract law etc..) * Comparative * Economic
Economics: the study of choice under conditions of scarcity * Scarcity-Choices, resources * Resources: * Land, * Labor, * Capital: physical Plant equipment * Entrepreneurial ability
Microeconomics vs. Macroeconomics
Micro: Behavior of individual actors on the economic scene * Households * Businesses * Government
Macro: total output, total employment, interest rates, economic growth, the aggregate economy, inflation, trade
Mankiw’s 10 General Principles of Economics: 1. People face tradeoffs 2. The cost of something is what you give up to get it 3. Rational people think at the margin- consider benefits and costs 4. People respond to incentives 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Governments can sometimes improve market outcomes 8. A country’s standard of living depends on its ability to produce goods and services 9. Prices rise when the government prints too much money (assuming full employment) 10. Society faces a short run tradeoff between inflation and unemployment
(Purple=Macro)
Scientific Method 1. Observation 2. Economic theory
Economic theory
Assumptions to simplify the problem a. Theoretical model: and abstract representation of reality i. Model should be as simple as possible to accomplish its purpose 3. Testable hypothesis -fields 4. Empirical testing –econometrics b. Ultimate purpose of building a model is to predict behaviors
Econ-Class Notes 9/11
Examples of Models * Supply and demand * Consumer theory * Form theory * Stars circling the earth * Bleeding to cure illness * Maps
Fields of Economics * Markets (bond, stock) * Monetary economics (banking) * International economics * Law & econ (contract law etc..) * Comparative * Economic