Mizzou ECONOM 1014 - Microeconomics (12 pages)

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Microeconomics



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Microeconomics

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Pages:
12
School:
University of Missouri
Course:
Econom 1014 - Principles of Microeconomics
Principles of Microeconomics Documents

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Microeconomics August 24 2011 WORKSHEET 1 AVAILABLE AFTER CLASS TODAY Homework 1 available after class Friday Economics Economics is the study of how people make decisions when faced with scarcity What to produce Which combination of factors of production should be used in production IE Tractors and fertilizers vs tons of people Who if anybody should allocate what is produced A group of people Markets Economics is a social science Deals with actions and interactions of people The Scientific Method Question Define hypothesis Test hypothesis Controlled vs natural experiments Causation vs correlation Revise original hypothesis Hypothesis that resist data testing become part of theories Economic Modes Abstract representation of the real word a collection of rules Difficult Behavioral economics combine psychology economic theories and other tools to model our behavior Goal make good predictions Not to describe the world in detail Role of simplifying assumptions Focus on the important relationships Avoid unnecessary details Generalizations The consumer theory applies to a regular consumer Other things equal assumption ceteris paribus Allows to focus on one event only Graphical expression Unlimited wants and limited resources money time etc force us to make CHOICES Each choice has an opportunity cost there is no free lunch Important correctly measure opportunity costs Value of next BEST opportunity Example Moving to another state to get a better paying job You currently earn 40 000 in Missouri Value of doing nothing 38 000 Opportunity cost of moving 40 000 78 000 cannot add these together it s either one or the other so this is wrong Cost Benefit Analysis How people make choices Important for producers governments taxes Assumption individuals are rational consistent Decision making process goal make yourself as happy as possible maximize your economic surplus Pro con lists are similar representations of a cost benefit analysis Lists are different for every person pro cons



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