UW-Milwaukee ECON 103 - 4 Principles of Economics (2 pages)

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4 Principles of Economics

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4 Principles of Economics


This lecture goes over what an economist is and what they do, and the four key principles of economics.

Lecture number:
Lecture Note
University of Wisconsin-Milwaukee
Econ 103 - Principles of Microeconomics

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Econ 103 1st Edition Lecture 1 Outline of Current Lecture I 4 key principles of economics II functions of economists III why economists disagree Current Lecture Economics science of society s management of scarce resources Scarcity basic principle of economics Efficiency when a society gets the most that it can from its scarce resources Equity when the benefits of resources are distributed fairly among the members of society 4 Key Principles of Economics 1 People face trade offs a As consumers food v clothing b As workers time v work c As a whole efficiency v equity 2 The cost of something is what you give up to get it a Decisions require comparing costs and benefits of alternatives i Ex go to class or sleep in b Opportunity cost the cost of an item is what you give up to obtain that item 3 Rational people think at the margin a Marginal changes are small incremental differences from the current state b Sunk cost things that happened before you made a decision c the decision to choose one alternative over another occurs when that alternative s marginal benefits exceed its marginal costs i doesn t depend on sunk cost 4 People respond to incentives 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 a People are reluctant to change unless they re given a reason to unless they re presented with a clear marginal benefit Functions of Economists Social scientists economists that are trying to explain the world o Positive statements attempt to describe the world as it is Policy advisory an economist trying to change the state of the city country or world o Normative statements state how the world should be Why 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 equity

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