Macroeconomics CH 1

Utility

Equals satisfaction

Good - Anything from which individuals receive utility or

satisfaction (can be tangible or intangible)

Bad - Anything from which individuals receive disutility

or dissatisfaction

- Disutility = Dissatisfaction

Utility is subjective example

One person may like the steak, while the other person may not like it

Types of Resources (5)

Land, labor, capital, entrepreneurship, time

Scarcity

unlimited wants > limited resources

Economics

is the study of how humans make decisions in the face of scarcity

Scarcity's 3 Effects

1. The need to make choices

- Trip to Hawaii or pay off car loan

2. The need for a rationing device

- The one who can pay for the car gets the car (price is a rationing device)

3. Competition

- People in the us > jobs

- Competing for parking

Opportunity costs

- the cost of the lost opportunity

- The higher the opportunity cost of doing something, the less likely you will incur this cost

Benefits and costs Example

Become vegan the benefits are you will

be healthier and thinner, but the cost is not being able to eat meat or ice cream

What does marginal mean?

additional

What is efficiency?

marginal benefits = marginal costs

Decisions at the margin

Marginal benefit > Marginal cost

Incentives

benefit > cost

Unintended Effects

a positive or negative outcome that was not anticipated

4 ways to maximize profit

1. Sell more quantity

2. Increase price

3. Lower expenses

4. Any combination of the three mentioned above

Ceteris Paribus

"Nothing else changes"

Theory

used to simplify things for better understanding

Positive vs. normative economics

Positive - The study of "what is" in economic matters

Cause and Effect

Normative - The study of "what should be" in economic matters

Judgement and Opinions

Graphing in economics x-axis, y-axis, up (left and right), down (left and right)

1. Price on the Y-axis

2. Quantity on the-X axis

3. Supply is always going up, left to right

4. Demand is always going down, left to right

Production Possibilities Frontier (PPF)