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I. UNIT I

I. UNIT I. A. The Nature and Methods of Economics. and the Economizing Problem. 1. Scarcity. 2. Opportunity Cost. 3. The inevitability and. consequences of resource. scarcity. 4. Three of the economic goals. amplified. a. Efficiency. 1. Allocative efficiency.

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I. UNIT I

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  1. I. UNIT I A. The Nature and Methods of Economics and the Economizing Problem 1. Scarcity 2. Opportunity Cost 3. The inevitability and consequences of resource scarcity 4. Three of the economic goals amplified a. Efficiency 1. Allocative efficiency 2. Technical efficiency b. Equitable distribution of income 5. Creating graphs 6. Interpreting graphs 7. Production possibilities curves... interpretation 8. The "isms" 9. The economic or cost-benefit perspective

  2. All decisions involve acts----a decision is always about whether to commit a certain act.

  3. All decisions involve acts----a decision is always about whether to commit a certain act. We're always looking ahead-----we don't make decisions about the past.

  4. All decisions involve acts----a decision is always about whether to commit a certain act. We're always looking ahead-----we don't make decisions about the past. We're always expecting extra benefits from committing a specific act. As far as decision is concerned, the extra benefits are the only benefits that matter-- benefits from committing same act in past are irrelevant except that they may inform us about what to expect.

  5. Expected benefits are VALUE JUDGMENTS.

  6. We're always expecting extra costs that we will incur if we commit an act. As far as decision is concerned, the extra costs are the only costs that matter-- costs incurred in past are irrelevant except that they may inform us about what to expect.

  7. Costs are value judgments.

  8. If extra benefits exceed extra costs: we commit the act If extra costs exceed extra benefits: we don't commit the act

  9. Extra Benefits are called MARGINAL BENEFITS... The extra benefits we will get if we commit a specific act.

  10. Extra Benefits are called MARGINAL BENEFITS... The extra benefits we will get if we commit a specific act. Extra Costs are called MARGINAL COSTS..... The extra costs we will incur if we commit a specific act.

  11. Extra Benefits are called MARGINAL BENEFITS... The extra benefits we will get if we commit a specific act. Extra Costs are called MARGINAL COSTS..... The extra costs we will incur if we commit a specific act. If MB exceeds MC, we commit the act. If MC exceeds MB, we don't commit the act.

  12. Simply means doing what is preferred. Suppose we wish to do A and B in a given time frame but can only do one.

  13. Simply means doing what is preferred. Suppose we wish to do A and B in a given time frame but can only do one. MC of A = value placed on B MB of A = value placed on A

  14. Simply means doing what is preferred. Suppose we wish to do A and B in a given time frame but can only do one. MC of A = value placed on B MB of A = value placed on A If MB of A is greater than MC of A, it means we place more value on A than B... A is the option we prefer.

  15. Sunk Cost-----The value we place on opportunities which we once had but we once had have already sacrificed. Marginal cost--the value we place on opportunities we still have but when we act. will sacrifice

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