ARE 1150 1nd Edition Lecture 1Outline of Current Lecture I. Define Economics II. Key Featuresa. Scarcity and choiceb. Purposeful behaviorc. Marginal analysis III. Marginal analysis in action: optimal pollution abatementCurrent LectureChapter 1: Limits, Alternatives, and Choices IV. Economics = social science concern with making optimal choices under conditions of scarcityV. Key features of economicsA. Scarcity and Choicei. Choices need to be madeii. Opportunity cost = value of resource in the best use; worth of resources in its next most valuable useiii. Resource is used sufficiently when opportunity cost is minimizedB. Purposeful Behaviori. Rational self interestii. Individual looks for and exploits opportunities to increase their utilitya. Selfless activities/acts may provide utility VI. Marginal Analysis A. Marginal = additional or extrai. Rule of decision-makingii. Compare marginal benefits of a proposed action with marginal costiii. Marginal Benefit = Marginal Cost  optimal level of activityVII. Marginal analysis in action: optimal pollution abatementa. Abatement of pollution = reduction in pollution, i.e. more abatement means lesspollution. Does it make sense that marginal cost of abatement (MCA) increases with an increase in abatement? Is it believable that marginal benefit of abatement (MBA) decreases with greater abatement? b. Read this from the textbook i. Theories, principles, and models 1. What are the typical steps followed in applying the scientific method? 2. How does a hypothesis evolve into an economic theory and subsequently into an economic principle? 3. What are economic models?4. Why should we think of economic principles only as generalizations? 5. What is the ceteris paribus (other things equal)