Midterm notes
September 26, 2025 8:30 AM
Chapters: 1,2,3,4,
Chapter 1
Scarcity means we don't have enough resources to do everything we want to. Our need and wants are
infinite but our time and planet are finite.
- Economics is the study of choices consumers, business managers and government (just people)
make in their efforts to make the best use of scarce resources in achieving their goals.
1. People are rational; 2. people respond to incentives and 3. optimal decisions are made at the
margin.
○ What goods or services be produced
○ How will the goods and services be produced
○ Who will receive the goods and serviced produced
- Economic models are used to analyze real world economic issues
A market is a group of buyers and sellers and the institutions(rules) or arrangements where people
come together to trade
People are rational: people make decisions and take actions that they believe will make them happy.
- They think of costs and benefits (only do more things with higher benefit)
People respond to incentives: religious, fulfillment, jealousy, compassion and greed
Optimal decisions are made at the margin: all or nothing - the choice between two.
- Marginal benefit vs marginal cost
- Do more of any activity with a marginal benefit greater than the magical cost
- MB>MC
- Marginal analysis - using spreadsheets and calculations
Trade offs means doing more of one things means we do less of something else.
The thing or value of what we engaged in is called opportunity cost.
What goods and services will be produced: choices that consumers, firms and governments make. Due
to the structure of the Canadian economy every day to help you decide what goods and services firms in
Canada and around the world provide
How will the goods and services be produced: using more workers vs machines ( more trade offs).
Schools: more profs less TA's etc.
Who will receive the goods and services: Those with higher incomes can buy more goods and services.
Taxes.
Centrally planned economics: where an individual or group of people (generally the government)
directly answers the three questions above. Stores and managers reported to government.
- Not been successful at producing low cost, high-quality goods and services.
- Tend to have dictator ships.
- Standard of living low.
Market economy rely on privately owned firmed to produce goods and services and decide how to
1B03 Econ Page 1
,Market economy rely on privately owned firmed to produce goods and services and decide how to
produce them. Markets determine who receives the goods and services
- Firms must produce things that people actually want to buy or they go out of business.
- Not good for important goods like roads and national defense
- David Hume
- Adam Smith - father of economics
- David Ricardo
- Jeremy Bentham
- John Stuart Mill
Neo - liberal or Neo-classical
Socialism emphasized cimmunity ownership of business: co-operatives, SOEs
Mixed economies use elements from both. Examples: in Canada coffee, food electronics and so on are
private and respond to the demand of consumers, but roads, healthcare and defense is provided by the
government.
Market economies are more efficient than centrally planned
Productive efficiency is when a good or service is produced at the lowest cost possible.
Allocative efficiency occurs when a countries resources are used to produce a mix of goods and services
that consumers want.
Markets are efficient because they rely on voluntary exchange: both buyer and seller are better off by
the transaction.
Equity: fair distribution of economic benefits
Economic models: simplifications or reality.
1. Decide on the assumptions to use in developing the model
2. Formulate a testable hypothesis
3. Use economic data to test hypothesis
4. Revise model if fails to explain economic data well
5. Retained the revised model to help answer similar economic
Models make behavioral assumptions about the motives of consumers and firms.
1. Assumtions
2. Hypothesis
3. Using economic data
4. Psotive vs negative analysis
Economic variable is something measurable such as wages paid.
- Hypothesis is a statement about economic variable that may be correct or not
○ Predictions
○ Tested
Scientific method - social science
Positive analysis concerns logic and facts vs normative is value judgments or what ought to be
Microeconomics and macro economics
Micro: study of how individual economic agents make choice - how they come together, impact on
government interventions on market outcomes. one person, one market, one firm
Macro is the economy as a whole, country province or region.
1. Production
2. Entrepreneur
1B03 Econ Page 2
, 2. Entrepreneur
3. Innovation
4. Technology
5. Firm, company or business
6. Goods
7. Services
8. Revenue
9. Profit
10. Household
11. Factors of production or economic resources
12. Capital
13. Human capital
Chapter 2
Production possibilities frontier and opportunity costs
A production possibilities frontier (ppf) is a curve showing the maximum attainable combinations of two
products that may be produced with available resources and technology
- Uses to illustrate the trade offs
Combinations on the frontier (a,b,c,d,e) or inside (f) are attainable with the resources said company has.
The ones on the line are efficient/productive because its getting the most it can
Opportunity set is inside the line
Choosing the best point on the PPF is called allocative efficiency - when society is making a combination
of goods are services that are most valued by consumers
Marginal rate of transformation is the rate which we can switch between good a and b - slope
Diminshing return s - as we put more resources into it it can hit a roof
1B03 Econ Page 3
September 26, 2025 8:30 AM
Chapters: 1,2,3,4,
Chapter 1
Scarcity means we don't have enough resources to do everything we want to. Our need and wants are
infinite but our time and planet are finite.
- Economics is the study of choices consumers, business managers and government (just people)
make in their efforts to make the best use of scarce resources in achieving their goals.
1. People are rational; 2. people respond to incentives and 3. optimal decisions are made at the
margin.
○ What goods or services be produced
○ How will the goods and services be produced
○ Who will receive the goods and serviced produced
- Economic models are used to analyze real world economic issues
A market is a group of buyers and sellers and the institutions(rules) or arrangements where people
come together to trade
People are rational: people make decisions and take actions that they believe will make them happy.
- They think of costs and benefits (only do more things with higher benefit)
People respond to incentives: religious, fulfillment, jealousy, compassion and greed
Optimal decisions are made at the margin: all or nothing - the choice between two.
- Marginal benefit vs marginal cost
- Do more of any activity with a marginal benefit greater than the magical cost
- MB>MC
- Marginal analysis - using spreadsheets and calculations
Trade offs means doing more of one things means we do less of something else.
The thing or value of what we engaged in is called opportunity cost.
What goods and services will be produced: choices that consumers, firms and governments make. Due
to the structure of the Canadian economy every day to help you decide what goods and services firms in
Canada and around the world provide
How will the goods and services be produced: using more workers vs machines ( more trade offs).
Schools: more profs less TA's etc.
Who will receive the goods and services: Those with higher incomes can buy more goods and services.
Taxes.
Centrally planned economics: where an individual or group of people (generally the government)
directly answers the three questions above. Stores and managers reported to government.
- Not been successful at producing low cost, high-quality goods and services.
- Tend to have dictator ships.
- Standard of living low.
Market economy rely on privately owned firmed to produce goods and services and decide how to
1B03 Econ Page 1
,Market economy rely on privately owned firmed to produce goods and services and decide how to
produce them. Markets determine who receives the goods and services
- Firms must produce things that people actually want to buy or they go out of business.
- Not good for important goods like roads and national defense
- David Hume
- Adam Smith - father of economics
- David Ricardo
- Jeremy Bentham
- John Stuart Mill
Neo - liberal or Neo-classical
Socialism emphasized cimmunity ownership of business: co-operatives, SOEs
Mixed economies use elements from both. Examples: in Canada coffee, food electronics and so on are
private and respond to the demand of consumers, but roads, healthcare and defense is provided by the
government.
Market economies are more efficient than centrally planned
Productive efficiency is when a good or service is produced at the lowest cost possible.
Allocative efficiency occurs when a countries resources are used to produce a mix of goods and services
that consumers want.
Markets are efficient because they rely on voluntary exchange: both buyer and seller are better off by
the transaction.
Equity: fair distribution of economic benefits
Economic models: simplifications or reality.
1. Decide on the assumptions to use in developing the model
2. Formulate a testable hypothesis
3. Use economic data to test hypothesis
4. Revise model if fails to explain economic data well
5. Retained the revised model to help answer similar economic
Models make behavioral assumptions about the motives of consumers and firms.
1. Assumtions
2. Hypothesis
3. Using economic data
4. Psotive vs negative analysis
Economic variable is something measurable such as wages paid.
- Hypothesis is a statement about economic variable that may be correct or not
○ Predictions
○ Tested
Scientific method - social science
Positive analysis concerns logic and facts vs normative is value judgments or what ought to be
Microeconomics and macro economics
Micro: study of how individual economic agents make choice - how they come together, impact on
government interventions on market outcomes. one person, one market, one firm
Macro is the economy as a whole, country province or region.
1. Production
2. Entrepreneur
1B03 Econ Page 2
, 2. Entrepreneur
3. Innovation
4. Technology
5. Firm, company or business
6. Goods
7. Services
8. Revenue
9. Profit
10. Household
11. Factors of production or economic resources
12. Capital
13. Human capital
Chapter 2
Production possibilities frontier and opportunity costs
A production possibilities frontier (ppf) is a curve showing the maximum attainable combinations of two
products that may be produced with available resources and technology
- Uses to illustrate the trade offs
Combinations on the frontier (a,b,c,d,e) or inside (f) are attainable with the resources said company has.
The ones on the line are efficient/productive because its getting the most it can
Opportunity set is inside the line
Choosing the best point on the PPF is called allocative efficiency - when society is making a combination
of goods are services that are most valued by consumers
Marginal rate of transformation is the rate which we can switch between good a and b - slope
Diminshing return s - as we put more resources into it it can hit a roof
1B03 Econ Page 3
