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Chapter 1 Why Economics?. These slides supplement the textbook, but should not replace reading the textbook. Who is an economist?. Persons learned in the science and practices of economics. What is the economic problem?.
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Chapter 1Why Economics? These slides supplement the textbook, but should not replace reading the textbook
Who is an economist? Persons learned in the science and practices of economics
What is the economic problem? Because we live in a world of scarce resources, but people have unlimited wants and needs, how do we meet their needs in this world of scarcity?
What assumption do we make? People behave in accordance to their own self interest
What is rationale self interest? People select the alternatives they expect will yield the most satisfaction and happiness
What isopportunity cost? That which is given up in the best alternative when a choice is made
How is opportunity cost estimated? Opportunity cost is subjectively estimated by the individual decision maker
What is the opportunity cost of a city to use local taxes to pay for a park? The best alternative foregone by not building the park
What is your opportunity cost of attending college? If you make $300 a week, but you expect you could make $500 without school - your opportunity cost is $200
What is the opportunity cost of cleaning your room? It’s greater on sunny days than on rainy days
What ismarginal analysis? You will decide to do something if your marginal benefit exceeds your marginal cost
What is macroeconomics? The study of the economic behavior of entire economies
What is microeconomics? The study of the economic behavior in particular markets, such as the market for computers
What is a market? A set of arrangements through which buyers and sellers carry out exchange at mutually agreeable terms
What is special about the market? Unless there is a market transaction we are not concerned about it in economics
What is a good? A tangible item that is used to satisfy wants
What is a service? An intangible activity that is used to satisfy wants
What is afree good or service? There is enough of a good or service to go around to everyone who wants it for free
What is a Scarce Good or Service? There is not enough of a good or service to go around to everyone who wants it for free
When is a good or service scarce? When the amount people desire exceeds the amount available to them at a zero price
What is a resource? Something that is used to produce goods and services
What are some examples of resources? • Land • Labor • Capital • Entrepreneurship
What is land? Plots of ground and other natural resources used to produce goods and services
What islabor? The physical and mental efforts of humans used to produce goods and services
What is capital? Buildings, equipment, and human skills used to produce goods and services
What is human capital? The skills used to work with capital
What does money allow you to do? Make choices
What isentrepreneurial ability? Managerial and organizational skills combined with the willingness to take risks
Entrepreneur characteristics? • has a dream • overcomes obstacles • delayed gratification • is a risk taker • can duplicate himself • strives to be unimportant
Why can the entrepreneur have more free time, make more money, and have more security than an employee? A business owner can duplicate himself
How can you duplicate yourself? • employees • rental property • savings in a bank • owning shares of stock
Why is Duplication the flip side of debt? Life is either an adding to or a taking away, growth is adding to, not growing is taking away
What are two basic laws of entrepreneurship? • What ever you have you will be given more, and what you do not have will be taken away • Whatever you give away you keep and whatever you keep you lose
Is economics more like history or math? It is like math, know the vocabulary, understand the concepts, and use your logical thinking
What is the rule of man? Events are determined by whoever is in authority
What is the rule of law? Events are determined by law
What is a democracy? The majority rules What is a danger in a democracy? The majority can take everything away from the minority
What is a republic? A political system based on law What is the purpose of a republic? To protect the minority from the majority
What is a democracy in a republic? A political system where there is a balance between a democracy and a republic
What is a positive economic statement? A statement that can be proved or disproved by reference to facts
What is a normative economic statement? A statement that represents an opinion, which cannot be proved or disproved
More or less government? Choices are not clear cut
Why did Europeans come to America in 1492? To flee the autocratic policies of government and the catholic church
Why was America a colony of England in the 1600s and 1700s? To enrich England in terms of gold and silver
What is Mercantilism? The belief that gold and silver constituted a nation’s wealth
What role did the government play under mercantilism? Government had to play a large role in economic affairs, a strong central government was supported
How does a country enrich itself? It encourages exports and discourages imports
What was the East India Company? A company which the English government gave monopoly power to buy certain raw materials from Americans at low prices
What is a good book on the subject? Merchant Kings: when Companies Ruled the World, 1600-1900 by Stephen R Bown
What else did the English government do? It forbid Americans from manufacturing, therefore forcing them to purchase goods from England
