Econ 101 Intro notes
1) Some definitions
2) Economics as a science
3) Production possibilities frontier
Reading Chapters 1,2,3
Definitions
Economics: the study of the choices people make and the actions they take in order to make the best use of scarce resources in meeting their wants and needs Economic choices:
Consider some activity X. Then a simple rule of economics is:
If benefits (activity X)> Costs (Activity X), then do activity X
If Costs (activity X) > Benefits (activity X), then do not do activity X
Activity X : Policy Set the speed limit on the highway; Edmonton to Calgary at 10km/h
Costs: Increased travel time Increased fuel costs Change all road signs Travel fatigue Increased pollution Discourage travel and tourism Enforcement costs go up Shipping costs go up
Benefits: Less deaths Microeconomics: the study of the choices and actions of individual economic units such as households, firms, consumers, etc. Ex. How does bad weather in Florida affect sales of oranges?
Macroeconomics: the study of the behavior of the aggregate economy, including issues like unemployment, inflation, and changes in the level of national income.
Judging Economic Allocations
Allocations of resources can be evaluated on the basis of:
1) Efficiency
[Allocative efficiency is present when society’s resources are so organized that it is impossible to make someone better off by any reallocation without hurting someone else. (This is Pareto efficiency) not realistic nor used today
No way of making myself better off without making someone worse off. Can’t devote any policies at all if there will be losers]
Efficiency occurs when net benefits are maximized. (Net benefits = benefits – costs)
2) Equity
Distributing goods and services in a manner considered by society to be fair.
Economists don’t do equity
3) Moral and Political consequences
Positive vs. normative Economics
Positive Economics
2) Economics as a science
3) Production possibilities frontier
Reading Chapters 1,2,3
Definitions
Economics: the study of the choices people make and the actions they take in order to make the best use of scarce resources in meeting their wants and needs Economic choices:
Consider some activity X. Then a simple rule of economics is:
If benefits (activity X)> Costs (Activity X), then do activity X
If Costs (activity X) > Benefits (activity X), then do not do activity X
Activity X : Policy Set the speed limit on the highway; Edmonton to Calgary at 10km/h
Costs: Increased travel time Increased fuel costs Change all road signs Travel fatigue Increased pollution Discourage travel and tourism Enforcement costs go up Shipping costs go up
Benefits: Less deaths Microeconomics: the study of the choices and actions of individual economic units such as households, firms, consumers, etc. Ex. How does bad weather in Florida affect sales of oranges?
Macroeconomics: the study of the behavior of the aggregate economy, including issues like unemployment, inflation, and changes in the level of national income.
Judging Economic Allocations
Allocations of resources can be evaluated on the basis of:
1) Efficiency
[Allocative efficiency is present when society’s resources are so organized that it is impossible to make someone better off by any reallocation without hurting someone else. (This is Pareto efficiency) not realistic nor used today
No way of making myself better off without making someone worse off. Can’t devote any policies at all if there will be losers]
Efficiency occurs when net benefits are maximized. (Net benefits = benefits – costs)
2) Equity
Distributing goods and services in a manner considered by society to be fair.
Economists don’t do equity
3) Moral and Political consequences
Positive vs. normative Economics
Positive Economics