Unit I Flashcards
What is Economics?
- The study of CHOICE
- The study of SCARCITY
- The study of OPTIMALITY
Scarcity is…
when what society WANTS … EXCEEDS how much there is
True or False!
1) If you can pay for it, it’s NOT scarce
2) Things can be BOTH abundant and scarce
1) TRUE! You can still obtain it
2) TRUE! It’ll be considered scarce in the world of economics
- Consider fossil fuels: it’s used for everything…cooking, heat, energy…but it is ultimately limited (will run out one day)
Scarcity & Rarity are not to be confused…why?
Scarcity speaks about things (goods & services) that PEOPLE WANT.
With rare things, they can still be obtainable but more importantly, there’s NO DESIRE for it.
- Say I’m a starving artist. I draw a random picture and put it on the market. It’s one of a kind because I made it, therefore it’s rare.
We don’t think too hard on allocation - where this piece of art goes or really WHO gets it - because…there’s NO DEMAND FOR IT. No one’s going to actively be wanting it or fighting over it.
Even if someone purchases it, it’ll satisfy the demand. It’s done. And it’s just one person too, again not being actively desired for by numerous people.
The moment TWO OR MORE people want it, then we start considering more about allocation!
Optimality is…
Getting the best possible result/getting the most out of life by:
- how we make the best choices
- how we best allocate resources
THINK EFFICIENCY
Microeconomics
Focus on businesses, individuals, households, and firms in a INDIVIDUAL market
(came before the macroeconomics study)
Macroeconomics
Focus on ENTIRE ECONOMY
Here, you’ll see: GDP, fiscal policy, inflation, unemployment, economic development, etc.
What are the three rules of economics?
- Incentives matter
- There’s always tradeoffs
- idk yet
Incentives Matter
Tradeoffs
the third rule
What is scarcity?
Cost-Benefit Analysis
Path Dependence
Capital
