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Ecn 212

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Economics
A. Law of Scarcity – we have unlimited wants but limited means to satisfy all of our wants.
B. Definitions of Economics
1. (book) Economics studies the choices we make, due to scarcity & the incentives affecting our choices.
Ex: small choices- where to eat. Big choices- global warming
2. Gary Becker- Economics studies rational human behavior.
Rational- predictable method. Behavior- choices we make.
- Can study many aspects of our lives & society using economics.
- Can study crime using economics.
3. Alfred Marshall- Economics studies how we go about the daily business of living.
-From wake to sleep... we always make choices
Microeconomics - study individual choices, people, business, markets.
Macroeconomics - study social choices, country, world.
-macro built from micro
-micro affected by macro
Traditional Economics people working, producing, buying, selling
3 Economics Questions:
1. What to produce? - Choices in production. Produce more of 1 good/ Produce less of another good.
2. How to produce? – Choices in resources to use.
Better worker = more expensive
3. Who gets production? – Choice in distribution & use.
-Mainly solved by markets
Markets – buyers & sellers in voluntary trade using prices.
What to produce - make what buyers want.
How to produce - produce at lowest cost. Efficient use of resources.
Who gets production - who is willing to buy or able to pay.
-Use government to provide goods that markets do not adequately provide ex: defense, roads, education, police
Self & Social Interest
Self Interest – my choices to benefit me
Social Interest – my choices to benefit others
-Sometimes self & social interests do not conflict. EX: Markets
-Sometimes self & social interests do conflict. EX: Smoking, driving too fast, crime
-We have laws & regulations
Economic Thinking – making choices
1. Rational Choice – predictable way of making choices. 4 ideas: 1. Goal is happiness – choices make us happier 2. More is preferred to less –of things that make us happy 3. We can rank choices – 1st, 2nd, 3rd, 4th…… equal choices = indifferent

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