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CSU ECON 204 - Introduction to Microeconomics

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ECON 204 1st Edition Lecture 1 Outline of Last Lecture NoneOutline of Current Lecture Defining an Economy A. Types of economies.What to Consider when Thinking Like an EconomistDistinguishing Macroeconomics from MicroeconomicsA. Macroeconomic AggregatesNational Income Accounts and Product AccountsCurrent LectureDefining an EconomyWhat is an economy? An economy is a system for coordinating society’s productive activities (Kurgan, 2009). Types of economiesCommand – controlled by governing force (ex: Egyptians, Mayans…).Tradition – economic system culture has grown accustomed to and continues to follow (ex: feudalism).Market – decisions about production and consumption made by individual producers and consumers (ex: America has a market economy, use of supply and demand). What to Consider when Thinking Like an Economist-All resources (any type of good used to produce something else) are scarce.-Scarcity and choice are central to economics, specifically individual choice, meaning the decision by an individual of what to do (and what not to do). -Opportunity costs, the second option one misses when they choose option A, are important in decision-making and individual choices.-Purposeful behavior is to maximize objective given constraints.-Positive vs. normative economics: positive approaches economics objectively using data and scientific evidence while normative explores the “should” and varies depending on the economist.-Agency is the ability to take actionExamples: Maximize profit given fixed and variable costs.Maximize social welfare subject to tax revenues.Distinguishing Macroeconomics from MicroeconomicsMacroeconomics views the economy as a whole from a larger, overall view.Microeconomics focuses on the individual and views the economy in a smaller scale.Examples:“What determines the overall cost of labor?” is a macroeconomic question.“What is the opportunity cost of going to college?” uses microeconomic thinking.The behavior of the macro economy is greater than the sum of individual actions and market outcomes.Macroeconomic AggregatesGross Domestic ProductEmploymentPrice LevelNational Income Accounts and Product AccountsNational income and product accounts are calculated by individual countries and used to measure the size of the economy.National income and product accounts help determine what a country should spend money on (ex: to buy weapons for war or not).Gross Domestic Product: only includes what has been produced in that specific country.Gross National Product: like GDP but includes imports as


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