Economics Block 1 Chapter 1 Summary
L01.1 Defie eecoiomiecs aid the features of the eecoiomiec perspeectie
Economics
Social science concerned with making optmal choices under conditons scarcity
Economic wants exceed society's productie capacity
Economic perspectiee
= is the way economists iiew the world
1. Scarcity and choices
2. Purposeful behaiiour to increase utlity
o Ratonal self-iinterest -i
3. Marginal analysis
1. Secarecity aid echoieces:
o Recourses are needed to make goods and seriiced but they are limited
o Choices use to be made
o No free lunch -i-i> your perspectie it's free someone always bears the cost
2. Purposeful behaiiour to iiecrease utlity:
and how consumers and businesses exhibit purposeful behaiior in order to increase
their utlity
If resources weren’t scarce, we wouldn’t haie to make choices.
we haie to make choices cost to eiery choice and = “opportunity cost.”
o “There’s no such thing as a free lunch” comes from.
note that eieryone’s opportunity cost will be diferent.
3. Margiial aialysis:
Indiiiduals and insttutons make relatonal decisions based on comparisons of
marginal costs and marginal benefts
Marginal costs The ecosts from each additonal increment or unit
Marginal beneft The beieft from each additonal increment or unit
Opportunity costse
The sacrifce of the alternatie that wasn't chosen
The ialue of the next best good or seriice forgone to obtain something
Example: you can go to a moiie or make homework. You choice for going to a moiie
so you can't make homework in that tme. The opportunity cost is homework.
, Economics Block 1 Chapter 1 Summary
LO1.2 desecribe the role of eecoiomiec theory ii eecoiomiecs
Economic principle
= Statement about economic behaiiour or the economy that enables predicton of
the probable efects of certain actons
Generalizatons
o -i-i
Other-iequal-iequal assumpton // ceteris paribus
o The assumpton that factors other than those being considered do not
change
graphical expression
LO1.3 distiguish miecroeecoiomiecs from maecroeecoiomiecs aid positie eecoiomiecs from
iormatie eecoiomiecs
Microeconomics The study if the indiiidual consumer, frm or market
Macroeconomics The study of the entre economy op major aggregate of the
economy
Aggregate Collecton if specifc economic units treaded as if they were one
unit
Positie economics Economic statements that are factual (what is..)
Normatie economics Economic statements that iniolie ialue judgments (what ought
to be)
LO1.4 explaii the iidiiidual's eecoiomiziig problem aid how trade-ofss opportuiity ecostss
aid ataiiable ecombiiatois ecai be illustrated with budget liies.
The economizing problem
The need to make choices because economic wants exceed economic means
People must decide what to buy and what to forgo (limited income and unlimited
wants)
Budget line (budget constrain)e
used to illustrate the greatest combinatons of
two goods that can be purchased with a certain
amount of income
It refects the greatest amount of these two
goods that can be purchased
The line is created for a specifc income
change budget line will shif
(with lower income, down – with higher income,
up)
L01.1 Defie eecoiomiecs aid the features of the eecoiomiec perspeectie
Economics
Social science concerned with making optmal choices under conditons scarcity
Economic wants exceed society's productie capacity
Economic perspectiee
= is the way economists iiew the world
1. Scarcity and choices
2. Purposeful behaiiour to increase utlity
o Ratonal self-iinterest -i
3. Marginal analysis
1. Secarecity aid echoieces:
o Recourses are needed to make goods and seriiced but they are limited
o Choices use to be made
o No free lunch -i-i> your perspectie it's free someone always bears the cost
2. Purposeful behaiiour to iiecrease utlity:
and how consumers and businesses exhibit purposeful behaiior in order to increase
their utlity
If resources weren’t scarce, we wouldn’t haie to make choices.
we haie to make choices cost to eiery choice and = “opportunity cost.”
o “There’s no such thing as a free lunch” comes from.
note that eieryone’s opportunity cost will be diferent.
3. Margiial aialysis:
Indiiiduals and insttutons make relatonal decisions based on comparisons of
marginal costs and marginal benefts
Marginal costs The ecosts from each additonal increment or unit
Marginal beneft The beieft from each additonal increment or unit
Opportunity costse
The sacrifce of the alternatie that wasn't chosen
The ialue of the next best good or seriice forgone to obtain something
Example: you can go to a moiie or make homework. You choice for going to a moiie
so you can't make homework in that tme. The opportunity cost is homework.
, Economics Block 1 Chapter 1 Summary
LO1.2 desecribe the role of eecoiomiec theory ii eecoiomiecs
Economic principle
= Statement about economic behaiiour or the economy that enables predicton of
the probable efects of certain actons
Generalizatons
o -i-i
Other-iequal-iequal assumpton // ceteris paribus
o The assumpton that factors other than those being considered do not
change
graphical expression
LO1.3 distiguish miecroeecoiomiecs from maecroeecoiomiecs aid positie eecoiomiecs from
iormatie eecoiomiecs
Microeconomics The study if the indiiidual consumer, frm or market
Macroeconomics The study of the entre economy op major aggregate of the
economy
Aggregate Collecton if specifc economic units treaded as if they were one
unit
Positie economics Economic statements that are factual (what is..)
Normatie economics Economic statements that iniolie ialue judgments (what ought
to be)
LO1.4 explaii the iidiiidual's eecoiomiziig problem aid how trade-ofss opportuiity ecostss
aid ataiiable ecombiiatois ecai be illustrated with budget liies.
The economizing problem
The need to make choices because economic wants exceed economic means
People must decide what to buy and what to forgo (limited income and unlimited
wants)
Budget line (budget constrain)e
used to illustrate the greatest combinatons of
two goods that can be purchased with a certain
amount of income
It refects the greatest amount of these two
goods that can be purchased
The line is created for a specifc income
change budget line will shif
(with lower income, down – with higher income,
up)
