Econ 101
Economics: intro
• Economic questions arise bc we want more than we can get.
• Inability to satisfy want: scarcity
• Incentives: rewards that encourage action or penalties that discourage action.
• Economics studies the allocation of scarce recourses among people
• Alfred marshell (1842-1924) shaped macro economics
• Joan robinson: “ the main reason to study econ is to avoid being fooled by it
Two main parts:
A) Microeconomics: studying the choice of individual decision makers. And how they interact in markets
B) macroeconomics: how the overall economy performs.
2 big questions
1. What, how and for whom do goods and services get produced?
2. When do choices made in self interest align with the social interest?
Answer 1)
• what: goods and services are objects that people value and are produced to satisfy human wants
• how: factors of production. A) Land: natural recourses. B) labour: work time & effort. “quality of labour” (human capital). C) capital: tools, equipment, machines, computers, buildings.. D) entrepreneurship: human resource hat organizes the above.
• For whom: who gets good: services depends on the incomes people earn. o Land=rent o Labour=wages o Capital=interest o Entrepreneurship=profit
Answer 2)
• We make choices in self interest o Choices you think are best for you
• Choices that are best for society are said to be in the “social interest” o Uses resources efficiently o Distributes goods “fairly”
When does self-interest align with social interest? (important)
• Environmental issues
• Bad corporate responsibility
The “Economic” way of thinking
Choice under scarcity => trade offs
Opportunity cost: the highest valued alternative that you give up to get something.
Choices at the “margin”
• We look at the tradeoffs “at the margin”
Marginal benefit (MB): benefit from an incremental increase in an activity.
Marginal cost (MC): opportunity cost from an incremental increase in an
• Economic questions arise bc we want more than we can get.
• Inability to satisfy want: scarcity
• Incentives: rewards that encourage action or penalties that discourage action.
• Economics studies the allocation of scarce recourses among people
• Alfred marshell (1842-1924) shaped macro economics
• Joan robinson: “ the main reason to study econ is to avoid being fooled by it
Two main parts:
A) Microeconomics: studying the choice of individual decision makers. And how they interact in markets
B) macroeconomics: how the overall economy performs.
2 big questions
1. What, how and for whom do goods and services get produced?
2. When do choices made in self interest align with the social interest?
Answer 1)
• what: goods and services are objects that people value and are produced to satisfy human wants
• how: factors of production. A) Land: natural recourses. B) labour: work time & effort. “quality of labour” (human capital). C) capital: tools, equipment, machines, computers, buildings.. D) entrepreneurship: human resource hat organizes the above.
• For whom: who gets good: services depends on the incomes people earn. o Land=rent o Labour=wages o Capital=interest o Entrepreneurship=profit
Answer 2)
• We make choices in self interest o Choices you think are best for you
• Choices that are best for society are said to be in the “social interest” o Uses resources efficiently o Distributes goods “fairly”
When does self-interest align with social interest? (important)
• Environmental issues
• Bad corporate responsibility
The “Economic” way of thinking
Choice under scarcity => trade offs
Opportunity cost: the highest valued alternative that you give up to get something.
Choices at the “margin”
• We look at the tradeoffs “at the margin”
Marginal benefit (MB): benefit from an incremental increase in an activity.
Marginal cost (MC): opportunity cost from an incremental increase in an