ECO 2030. Principles of Economics-Price Theory
Introduction
Economics
- Definition - economics is the study of the allocation of scarce
resources (goods and services)
- Resources - labor, land, capital, time, technology
- Scarcity - wants > ability of resources to satisfy wants
- Allocation mechanism - tradition, socialism/communism, capitalism
(markets)
-
Microeconomics (chapter 2) - the study of individual decision makers
(consumers, firms)
-
Macroeconomics (chapter 2) - the study of "the economy" as a whole (GDP,
inflation, unemployment)
Rational Choice
- Choice: "People face tradeoffs"
- Opportunity Cost: "The cost of something is what you give up to get it"
- Marginal Decisions: "Rational people think at the margin"
- Incentives Matter: "People respond to incentives"
Gains from Trade
- Trade Creates Value: "Trade can make everyone better off"
- Market Efficiency: "Markets are usually a good way to organize economic
activity"
- Market Failure: "Governments can sometimes improve market outcomes"