Econ 103 1st Edition Lecture 1 Outline of Current LectureI. 4 key principles of economicsII. functions of economistsIII. why economists disagreeCurrent LectureEconomics – science of society’s management of scarce resourcesScarcity – basic principle of economicsEfficiency – when a society gets the most that it can from its scarce resourcesEquity – when the benefits of resources are distributed fairly among the members of society4 Key Principles of Economics1. People face trade-offsa. As consumers: food v. clothingb. As workers: time v. workc. As a whole: efficiency v. equity2. The cost of something is what you give up to get ita. Decisions require comparing costs and benefits of alternativesi. Ex – go to class or sleep in?b. Opportunity cost – the cost of an item is what you give up to obtain that item3. Rational people think at the margina. Marginal changes are small, incremental differences from the current stateb. Sunk cost – things that happened before you made a decisionc. the decision to choose one alternative over another occurs when that alternative’s marginal benefits exceed its marginal costsi. doesn’t depend on sunk cost4. People respond to incentivesThese 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.a. People are reluctant to change unless they’re given a reason to / unless they’re presented with a clear marginal benefitFunctions of Economists- Social scientists – economists that are trying to explain the worldo Positive statements – attempt to describe the world as it is- Policy advisory – an economist trying to change the state of the city, country, or worldo Normative statements – state how the world should beWhy do Economists Disagree?- About the validity of alternative positive theories about how the world works- They have different values and therefore different normative views about what the policy should try to accomplish (efficiency vs.
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