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Scarcity: our inability to get everything that we want Incentive: a reward that encourages an action or a penalty that discourages one. Prices act as incentives. Microeconomics: is the study of the choices that individuals and business make, the way these choices interact in markets, and the influence of governments. Macroeconomics: is the study of the performance the national economy and the global economy. Goods and Services: are the objects that people value and produce to satisfy wants. Good are physical objects such as cell phones and automobiles. Servicesare taste performed for people such as cell-phone service and auto-repair service. What we produce varies across countries and changes over time. How we produce is described by the technologies and resources that we use. The resources used ti produce goods and services are called factors ofproduction, which are grouped into four categories: • land: natural resources, ex minerals, oil, gas, coal, water, air, forests, and fish• labor: the work time and work effort that people devote to producing goods and services is called labor. labor includes the physical and mental efforts of allthe people who work on farms and construction sites and in factories, shops, and offices. the quality of labor depends on human capital which is theknowledge and skill that people obtain from education, on the job training, and work experience. • capital: the tools, instruments, machines, buildings, and other constructions that businesses use to produce goods and services is called capital. Financialcapital plays an important role in enabling business to borrow the funds that they use to buy physical capital. • entrepreneurship: the human resource that organizes labor, land, and capital is called entrepreneurship. For whom? Who: consumes the goods and services that are produced depends on the incomes that people earn. People earn their incomes by selling theservices of the factors of production they own.• Land earns rent• Labor earns wages • Capital earns interest• Entrepreneurship earns profit Self Interest: you make a choice in your self interest if you think that choice is the best one available for you. All the choices that people make about how to usetheir time and other resources are made in the pursuit of self interest. Social Interest: an outcome is in the social interest if it is best for society as a whole. Efficient: economists use the word efficient to describe a situation that can’t be improved upon. Resource use is efficient if it is not possible to make someonebetter off without making someone else worse off. If it is possible to make someone better off without making someone worse off, society can be made better offand the situation is not efficient. Tradeoff: is an exchange- giving up one thing to get something else. Rational Choice: is one that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice. Benefit: the benefit of something is the gain or pleasure that it brings and is determined by preferences- by what a person likes and dislikes and the intensity ofthose feelings. Opportunity Cost: is the highest valued alternative that must be given up to get it. Margin: you compare the benefits of something to it’s cost Marginal Benefit: the benefit that arises from an increase in an activity marginal cost: the opportunity cost of an increase in an activity is called marginal cost. if the marginal benefit from something exceeds its marginal cost, then you do that

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TEMPLE ECON 1101 - Lecture notes

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