Week 1 23 Aug

.docx

School

Georgia State University**We aren't endorsed by this school

Course

ECON 2106

Subject

Economics

Date

Dec 16, 2024

Pages

Uploaded by MasterScienceFerret33

Fundamentals: Module 1 - Aug 23Economics: study of decision making under scarcity – allocation of scarce resourcesScarcity: A condition that results from the inability of limited resources to satisfy unlimited wantsImplies choice.Every choice has a cost (tradeoff)To have one thing you’ve got to give up another.Everything is scarce but some more than other (relative scarcity)Positive (objective fact) vs Normative (subjective opinion)Macroeconomics vs Microeconomics:MicroeconomicsoIndividual units (markets) that collectively make up the economy.oIndividuals, businesses, industriesMacroeconomics:oOverall aspect of the marketTopics in microeconomics:How does a rise in sales tax impact the sales industry.How does increasing the minimum wage affect teen employment.What is an optimal pricing strategy for subscription-based services.

Opportunity CostThe value of the next best alternativeThe value of the opportunity that you gave up when you chose one over another.Not all alternatives, just the next best choiceoEx: Trip to FloridaOptions: Orlando>Miami>TampaChoice: 1Stbest option (Orlando)Opportunity cost: 2ndbest option (Miami)oA farmer growing corn on their land –> growing wheat.oWatch a movie instead of doing homework.oStudying for one class over studying for another.oMoney spent on one item over the next best thing you could’ve bought.Marginal ThinkingThe change from consuming or producing one more unit of something.Economists use marginal analysis to compare the marginal benefits to the marginal costsof any given decision or activity.If the marginal benefit exceeds the marginal costs of producing one more unit – good.If the marginal benefit doesn’t exceed the marginal costs of producing one more unit – not ideal.Decision Rule:MB>MC -> Do more. (Benefit greater than cost)MB<MC -> Don’t do it. (Cost greater than benefit)Diminishing marginal benefit: as we consume more of a good or service the lower the benefit from each additional unit.Marginal Benefits ⬇Marginal Costs ⬆Increasing marginal costs: the more of a good or service produced the higher the marginal cost.“Law of increasing opportunity cost”Water BottleMarginal Benefit1302253154550

Production PossibilitiesThe set of attainable outputs of two goods, given a fixed amount of input.Comparative Advantage:oThe ability to produce a good or service at a lower relative opportunity cost than another producer.oWe need the opportunity cost of both parties involved in the comparison.Absolute Advantage:oOne party can produce more of a good or service for the same amount of inputs or the same quantity with fewer inputs.oMore efficient.Specialization:oLeads to mutual gains from trade.Terms of Trade:Price of a good, service or resource in terms of another.It must be mutually beneficial for a trade to take place.Th terms of trade must be between the opportunity costs of the buyer and seller.oPrice>seller’s opportunity costoGains from specialization and trade: