Intro

Question 1

What is Economics?

Answer 1

Study of how scarce resources are distributed

Question 2

Resources

Answer 2

Includes everything

Question 3

Scarcity arises because

Answer 3

• Resources aren’t infinitely abundant (plentiful)

• Human wants are insatiable

Question 4

Distribution

Answer 4

• Efficiency
• Fairness

Question 5

Economics is a

Answer 5

Social Science

Question 6

Economists work on

Answer 6

1. Finance
2. Money and Banking
3. Environment
4. Health
5. Transportation
6. Labor
7. Demographics
   8..9…10…others

Question 7

Economics vs Other Social Sciences

Answer 7

Distinguishing feature from other social sciences is its focus on incentives (motivations) in motivating human behavior

Question 8

10 Principles of Economics

Answer 8

1. People face trade-offs
2. Cost is what you give up to get something
3. Rational people think at the margin
4. People respond to incentives (stimulus, motivators)
5. Trade can make everyone better-off
6. Markets are usually good way to organize economic activity
7. Government can sometimes improve market outcomes
8. A country’s standard of living depends on its ability to produce goods and services
9. Price rises when government prints too much money
10. Society faces short-run trade-off between inflation and unemployment

Question 9

What is Microeconomics

Answer 9

How individual choices / decisions interact on the market

Question 10

Individual Choice

Answer 10

Decision by an individual of what to do and what to not do

Question 11

Individual Choice Basic Principles

Answer 11

1. Resources are Scarce
2. The real cost of something is what you are willing to give up to get it
3. “How Much?” Is a decision at the margin
   —> Making trade-offs at the margin comparing costs and benefits of doing activity
   ——> Study of such decisions is Marginal Analysys
4. People want to make themselves better-off

Question 12

What is Incentive (stimuli)

Answer 12

Anything that offers reward to people who change their behavior

Question 13

Interaction of Choices

Answer 13

Interaction of choices is a feature of most economic situations. ——> My choice affect yours and vice-versa

Question 14

Principles that underlie the Interaction of Individual Choices

Answer 14

1. There are gains from trade
2. Markets move towards Equilibrium
3. Resources should be used efficiently to achieve society’s goals.
   —-> (Efficiency “some better off” & Equity “fair share”)
4. Markets usually lead to efficiency
5. Government intervention can improve society’s welfare

Question 15

Efficiency

Answer 15

Economy is Efficient when it takes all opportunities to make some ppl better-off without making others worse

Question 16

Equity

Answer 16

Equity means everyone getting their own share

Question 17

Equilibrium

Answer 17

Economic situation is in equilibrium when no individual would be doing better by doing anything different

Question 18

Trade

Answer 18

In market economy, individuals engage in trade. They provide and receive back goods/services

Gains from Trade ppl get more with trade than with being self-sufficient

Specialization Each does what they good in + produce