Microeconomics Chapter 1

Scarcity

________- limited resources, unlimited economic wants.

Model

________ makes assumptions as mentioned before- full employment, fixed resources, fixed technology.

PPC

________- Used to see the maximum amount of products that can be created with scarce resources.

Economic Growth

________= growing the curve so it reaches farther out;

minimum wage

Increasing ________ pays some people more, but also forces businesses to hire less people.

Opportunity Cost

________- Basically the cost of choosing one option over another.

All resources are limited, some more than other

have to manage these while fulfilling as many economic wants

Economists must see possible consequences

cant just analyze what is there, have to predict what is not

Scarcity

limited resources, unlimited economic wants

Capital goods

government spending, more money spent on capital goods -→ future economic growth

Resources

Land, Labor, Capital, and Entrepreneurial ability

Economics focuses on how to deal with scarcity

macroeconomics deals with entire economy, micro deals with specific markets

PPC

Used to see the maximum amount of products that can be created with scarce resources

Anything on the line is and efficient use of resources

Inside is inefficient, outside is not attainable

Model makes assumptions as mentioned before

full employment, fixed resources, fixed technology

Opportunity Cost

Basically the cost of choosing one option over another

Example

If you make 10 dollars in a day and decide to go on vacation for 4 days, the opportunity cost is 40 dollars

Opportunity cost of food = reciprocal of opportunity cost of wood

4 units of wood per unit of food

Marginal Analysis

Analyzing benefits vs. costs of economic decisions

Graph shows constant opportunity cost

As you make more wood, you are losing a fixed amount of food, and vice versa

This graph shows increasing opportunity cost

Basically, as you give up more resources for making one thing to make another thing, those resources are less suited to make the new thing, so the opportunity cost is higher

Bias

"First rule of economics → scarcity, first rule of politics → forget rule one of economics."

Consumer goods

goods intended for direct use or consumption - helpful in short term, but not in long term.

Assumptions

full employment, fixed resources, fixed technology

Utility

How useful something is based on how low the opportunity cost is

Marginal Analysis

Analyzing costs vs. benefits of any decision - MR >= MC

Economic Growth

growing the curve so it reaches farther out