Microecon C1Q1

Economics

study of how society manages its scarce resources and a way to determine who gets what

1st goal of class

understand the power and limits of markets

2nd goal of class

think like an economist

3rd goal of class

what economics mean for christians

microeconomics

decisions and outcomes of individuals, households, firms, and government and how markets interact with each other

macroeconomics

economy as a whole, GDP, inflation, unemployment, behavior of fed, money supply

goal of chapter 1, fundamentals of economics

understand how economists think about decision making and markets

trade-offs

the alternatives that must be given up when a choice is made

why do people face trade-offs?

scarcity, wanting more than we can get with available resources

meaning of “there is no such thing as a free lunch”

everything has a cost, and even if something appears free, time could be the cost

oppurtunity cost

value of the next best thing which was given up

rationality

to systematically and purposefully preserve an objective, and people try to better themselves

marginal analysis

comparing marginal benefits and marginal costs when making a decision

marginal change

small incremental adjustment to a plan of action.

optimal decision

to pursue an action as long as the marginal benefit is greater than the marginal cost

optimal decision helps us to

conside the important benefits and costs and avoid the sunk cost fallacy

sunk cost

a cost that has already been incurred and cannot be recovered, making it irrelevant to future rational decision-making