ECON 2000 1st Edition Lecture 1Outline of Current Lecture I. Introduction to Economicsa. EconomicsII. Scarcitya. Definitionb. Factors of Productionc. ExamplesIII. Efficiencya. Productive Efficiencyb. Allocative EfficiencyIV. 3 Questions that efficiency and scarcity forces every society to ask:a. What to produceb. How to produce c. Whom to produce for V. Three types of Economic playersa. Individualb. Business/ Firmsc. GovernmentVI. Assumptionsa. Way Economic Players ActVII. Opportunity Costa. Definitionb. Example VIIII Review and Real World ExamplesCurrent LectureI. Introduction to Economicsa. Economicsi. a social science that studies how society best allocates its scarce economic resourcesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.ii. Economic deals with scarcity (limited resources)II. Scarcitya. Definitioni. is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs.b. Factors of Production.i. Labor: the human capitalii. Land: all resource from natureiii. Entrepreneurship: the risk takers with a skill setiv. Capital: All aspects of production (machines)c. Examplei. Factors of Production for a Universityi. You need space….. Landii. Faculty……………… Laboriii. President……………Entrepreneurship iv. Buildings…………….Capital ii. *** Money facilitates changes/ exchanges but is not a part ofFactor of Production***III. Efficiencya. Productive efficiencyi. Full utilization of economic resourcesi. Test for productive efficiency: You can’t add without losing somethingb. Allocative efficiencyi. Deemed optimal from multiple point of viewi. Optimal from society’s point of viewIV. 3 Questions that efficiency and scarcity forces every society to ask:a. What to produceb. How to produce c. Whom to produce for V. Three types of economic playersa. Individuali. The individual effect the 3 questions mosti. Consumer sovereignty: The consumer has the powerii. Trying to maximize: Happiness/Satisfactionb. Business/ firmsi. Trying to maximize: profitc. Government i. Trying to maximize: Society’s well-beingVI. Assumptions a. The economic players act in a rational, self-interested, and make decisions on the margin i. Rational: have a though processii. Self-interest: acts for what’s best for the individual or those close to them. *not necessarily self-centered.iii. Marginal: additional VII. Opportunity Costa. Definition: Forgone benefit of the next best alterative i. The benefit you lose from the other choice you could have madeb. For example: You are making the decision to go to class or to not go to classSo the opportunity cost of not going to class is getting better grades, because getting good grades is a benefit of going to class (which was the option you did not chose). This is demonstrated below Vice versa, the opportunity cost of going to class is not being able to sleep in. This is because sleeping in is a benefit of not going to class (the option you did not chose). This is demonstrated below. BenefitsNot going to class- Sleep in- Hang out with friendsGoing to class:- Get better grades- Gain a deeper understandingOpportunity CostNot going to class- Sleep in- Hang out with friendsGoing to class:- Get better grades- Gain a deeper understandingOpportunity CostBenefits of not going to class- Sleep in- Hang out with friendsVIII. Review real life examplesYour fraternity has an awesome party coming up. It is sure to make history! Help throwing this party will make you a legend and a BG Party God. But this really attractive girl from Econ wants you to help her study on the same night (luckily you have these really awesome notes from GradeBuddy ;D). Helping her could potentially get you a date with her, and she is a total dime. You are faced with scarcity. You do not have enough time to do both things, and not enough of you (although cloning would be sweet, it’s not going to happen). This forces you to make a choice between going to the party, or studying with the girl. Recap: Scarcity (lack of time, and multiples of you) forces people to make choices (between the party, or the girl)You sit down and think about this: o The benefits of going to the party would be: becoming a legend and aBG Party Godo The benefits of studying with the girl: Potential date You decide the girl is worth it, you study with her, and you manage to get a date with her. But you missed the party making you miss out on becoming a BG Party God. Not becoming a BG Party God is your opportunity cost of studying with the girl. Congratulations! You do Econ every weekend and do not know