Lecture 1- IntroductionTen Basic Principles of EconomicsI. Tradeoffs a. Efficiency: getting the most from scarce available resourcesb. Equality: when resources are evenly distributed throughout societyc. Examples of tradeoffsi. Guns vs. butter ii. Food vs. clothingiii. Leisure time vs. going to workII. Opportunity Costs: What you give up to get what you desirea. Going to college vs. going to workb. Saving money for something in the future vs. spending nowIII. Comparing and contrasting benefits to costsa. Analyzing the margins (extra)i. Marginal Benefits (MB)ii. Marginal Costs (MC)b. Pros vs. consIV. People respond to incentivesa. “Economics is all about incentives.” –Professor Elderb. People respond when MB > MC (that is, when the benefits outweigh the costs)Part 2 of Ten Basic Principles: How People InteractV. Trade can help everyonea. Individuals can become involved in tradeb. Competition is encouraged by positive trade resultsc. Trade allows for and encourages specialization of skillsVI. Markets can be used to organize economic activitya. Control rests mainly between households and businessesi. What to buyii. Who to hireiii. How much to produceb. Interaction between households and businesses is referred to as “the invisible hand.”VII. Governments can improve market outcomes.a. When the market fails the government steps in to…i. Improve efficiencyii. Improve equalityb. The government can regulate the invisible hand.VIII. A country’s quality of living is dependent on its ability to produce goods and services.IX. Inflation occurs when the government prints too much money.X. Society plays a balance game between inflation and unemployment.EC 110 Principles of MicroeconomicsOther Big Ideas of EconomicsI. Scarcity: when society has less to offer than people are demanding.a. Supply and demandb. Managing resourcesII. Incentives (as mentioned above, people respond to them.)III. ChoicesIV. Decisions: the reason to study economicsa. How people make decisionsb. How to divide resources (butter vs. guns, again)V. Forces that affect the economy in the grand scheme of things (but this is known as
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