ECON 203 Lecture 1 Outline of Current Lecture I Main Idea II Types of Capital III Goal of Economics Current Lecture Main Ideas Economics is the study of rational decision making under restraints Scarce Resources Macro Economics is concerned with the collective issues of the economy Types of Capital Physical Capital Tools that people use that help them increase production Human Capital The skills that individuals have that help them increase production you go to college to increase your knowledge which increases human capital Skills depreciate Financial Capital What you use to trade for Goods what lets you purchase physical capital Money which is generated by production Social Capital How much trust is there between employers and employees to maximize production if an employer trusts and employee the contract will be simple and the employer will just expect the employee to meet the level of production but if it doesn t there it will be complicated so an employer can terminate the employee quickly if they don t meet the expected production level Example Human Capital is your value as a worker and defines how much you can produce Physical Capital helps you increase your production When you work you generate financial capital which can be used to purchase more and better physical capital which continues to increase your production The more you produce the more Social Capital is gained between you and your employer which makes you want to work harder All of these increase our economic capability Goal of Economics The goal of Economics is to figure out how to maximize our economic capability despite constraints