ECON 105 Lecture 2 Outline of Last Lecture I. Antioxidant and redox regulation of gene transcription Outline of Current Lecture I. Marginal Analysisa. Opportunity CostII. Economic Problemsa. What? How? For Whom?b. Circular Flow of Economic Activityc. GraphsIII. Relative Prices and Money PricesCurrent LectureMarginal AnalysisMarginal Analysis: “what happens with one more?” – The extra benefitRational economic agents: Make a decision at margin, marginal benefits EXCEEDS marginal costsOpportunity Cost – cost of the next best alternative foregone- Scarce goods have positive OC- Free goods have a zero OC- Ask yourself, “What are you giving up?”Economic ProblemsWhat to produce?- Necessities vs Luxuries How to produce?- Labor intensive vs Capital intensive 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. *sensitive to fluctuation Fewer workersMore MachinesMore workersFewer MachinesFor Whom to produce?Circular Flow DiagramThe circular flow of money (transactions) and Economic activity*this diagram is where you answer the questions for buying and selling, What? How? For Whom?Independent variables- change by itselfDependent variables – changes as a result of independent variable Slope – slope of a straight line is constant => can be calculated onceArea- L x W (rectangle)½ B x H (triangle)1 2 3 400.050.10.150.20.250.30.35Positive Slope00.511.522.533.544.5Negative SlopeSeries 3Relative Prices and Money PricesMoney prices – price of a good or service in the unit of currency (dollars, euros, pesos) Relative prices – price in other terms or service (or good)*microeconomics focuses on relative price*macroeconomics focuses on money price*relative and money prices can move in same OR opposite direction but not