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VCU ECON 203 - Vocabulary and Intro to Consumer Demand

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ECON 203 1nd Edition Lecture 2Outline of Last Lecture I. Introduction to EconomicsA. Economic modelsOutline of Current Lecture I. Vocabularya. Fallacies of economic reasoningb. scarcityII.consumer demanda.total use valueb.marginal use valueCurrent LectureI. VocabularyPositive statements- statements of fact, of what is, or what would occur if somethingelse were to happen. Must be true or false.Normative statements- state what should be. Cannot be true or falsec. Fallacies of economic reasoning-mistakes of logic commonly madeFallacy of composition-occurs when something that may be good for one person is considered good for everyone.Ex. If you leave a game early to avoid traffic, it is good. If everyone leaves early to avoid traffic, it will create traffic and is not good.Post-hoc fallacy- occurs when it is assumed that since event A happened before event B, A caused B. It is important to avoid assuming causality just because a sequence has been noticed.Ex. Event A: you bring an umbrella. Event B: it starts raining. Just because you brought an umbrella does not mean you made it rainOther conditions fallacy- assuming that since two events happened together in the past that they will always occur together in the future.Ex. If event A happened and then event B happens, it does not mean that every time event A will happen, B will follow. These 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.Misleading comparison- comparisons that are made that do not reflect the true differences between the goods. Mostly this mistake is made because they forget to account for adjustments of circumstances in the argument.Ex. Arguing that paying $12.50 for a movie ticket now is ridiculous because in 1947 they were $0.50. this does not take into account the price of inflation, strength of the dollar then and now, or minimum wage of the time period.Selection bias- occurs when people use data that is skewed or bias. Ex. Determining the average drinking age of the student body by asking only the people at the bar- or conversely-asking only the people at the library on a Saturday night.d. Scarcity: Scarcity => Conflict => Choices => Costs (Opportunity costs)Scarcity- limited resources with unlimited demands. There is a limited amount of a good to go around, therefore people must make a choice. Every choice incurs a cost, whether it be money or time-nothing is free!Scarce goods- any good that is desired more than it is available. These may change depending on the values of the personOpportunity cost- the highest cost a person is willing to pay for a goodII. Consumer DemandIn economic terms, everything is a want-needs do not existEvery consumer has a limited budget. That limit may change depending on the consumer.a. Total use value(TV) – each choice has a value. That value is different depending on the person. Each person must ask themselves what would be the most they would spend/exchange for that good? TV is the upper boundary a limited budget a person is willing to give. Consumers usually keep TV to themselves to try to get a better deal.b. Marginal use value(MV)- the highest price a consumer will face and still pay for the


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