Econ 1202 1st Edition Lecture 1Outline of Current Lecture I. Introduction to EconomicsII. 3 Key Concepts of EconomicsIII. Types of Economies Current LectureI. Introduction to Economies a. People make choices because resources are scarceb. Scarcity: unlimited wants exceed the limited resources available to fulfill these wantsi. Economics is the study of these choicesc. Economic models: simplified versions of reality used to analyze real-world applications II. 3 Key Ideas/Assumptions in Economicsa. People are rational. i. Rational: using all available information to achieve our goalsii. Rational consumers and firms weigh benefits & costs of each action and try to make the best decision possible 1. I.e. Microsoft doesn’t randomly choose a pricing—they have to assume their customers are rational and won’t pay an unreasonably high price for their productsb. People respond to incentives. i. As incentives change, so do the actions that people will take 1. Changes in several factors have resulted in an increase in obesity including decrease in price of fast food & improved non-active entertainment options (videogames, TV)c. Optimal decisions are made at the margin. i. While some decisions are all or nothing, most decisions involve doing a little more or a little less of somethingii. Marginal cost/benefit of studying:1. MC: forgoing the opportunity for more entertaining options2. MB: understanding material betteriii. What goods and services will be produced?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.1. Individuals, firms, and governments must decide on goods and services that should be producediv. Opportunity cost: the highest valued alternative given up in order to engage in some activityIII. Types of Economic Marketsa. Centrally Planned Economies: government decides what to produce, how to produce it, and who receives the goods and servicesb. Market Economies: the decisions of households and firms determine what is produced, how its produced, and who receives the goods and servicesi. Market: a group of buyers and sellers of a good or service ii. Market system is based on incentiveiii. Price rations in a market society c. Mixed Economies: features of both the above, most decisions result from the interaction of buyers and sellers, but government plays a significant role in the allocation of
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