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    Macroeconomics - Arnold - Chapter 1

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    tsam181618
    This document provides an overview of key economic concepts covered in a lecture, including: goods and bads, scarcity, opportunity costs, costs and benefits, decisions at the margin, efficiency, unintended effects, exchange, microeconomics, macroeconomics, positive and normative economics. It also gives examples of microeconomic and macroeconomic questions.

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    Macroeconomics - Arnold - Chapter 1

    Uploaded by

    tsam181618
    411 views10 pages
    This document provides an overview of key economic concepts covered in a lecture, including: goods and bads, scarcity, opportunity costs, costs and benefits, decisions at the margin, efficiency, unintended effects, exchange, microeconomics, macroeconomics, positive and normative economics. It also gives examples of microeconomic and macroeconomic questions.

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    This document provides an overview of key economic concepts covered in a lecture, including: goods and bads, scarcity, opportunity costs, costs and benefits, decisions at the margin, efficiency, unintended effects, exchange, microeconomics, macroeconomics, positive and normative economics. It also gives examples of microeconomic and macroeconomic questions.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    411 views10 pages

    Macroeconomics - Arnold - Chapter 1

    Uploaded by

    tsam181618
    This document provides an overview of key economic concepts covered in a lecture, including: goods and bads, scarcity, opportunity costs, costs and benefits, decisions at the margin, efficiency, unintended effects, exchange, microeconomics, macroeconomics, positive and normative economics. It also gives examples of microeconomic and macroeconomic questions.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    of 10

    In This Lecture…..

     Goods and Bads


     Resources
     Scarcity
     Opportunity Costs
     Costs and Benefits

    In This Lecture…..

    Decisions Made at the Margin


    Efficiency
    Unintended Effects
    Exchange

    1
    In This Lecture…..

     Microeconomics &
    Macroeconomics
     Positive &
    Normative
    Economics

    Building A Definition of Economics


    ~ Goods and Bads ~
    Utility - The satisfaction one receives from a
    good
    Bad - Anything from which individuals
    receive disutility or dissatisfaction
    Good - Anything from which individuals
    receive utility or satisfaction
    Disutility - The dissatisfaction one receives
    from a bad

    Building A Definition of Economics


    ~ Resources ~

    Land - All natural


    resources, such as
    minerals, forests,
    water, and
    unimproved land

    2
    Building A Definition of Economics
    ~ Resources ~

    Labor - The
    physical and mental
    talents people
    contribute to the
    production process

    Building A Definition of Economics


    ~ Resources ~

    Capital - Produced goods


    that can be used as inputs
    for further production,
    such as factories,
    machinery, tools,
    computers, and buildings

    Building A Definition of Economics


    ~ Resources ~
    Entrepreneurship - The
    particular talent that some
    people have for:
    organizing the resources
    of land, labor, and capital
    to produce goods
    seeking new business
    opportunities
     developing new ways of
    doing things

    3
    Scarcity

    The condition in
    which our wants
    are greater than the
    limited resources
    available to satisfy
    those wants

    Opportunity Costs

    The most highly valued opportunity


    or alternative forfeited when a choice
    is made

    Study or ???

    Cost

    Benefit

    4
    Economics, the Science of Scarcity

    The science of how individuals and


    societies deal with the fact that wants are
    greater than the limited resources
    available to satisfy those wants.

    Rationing Device

    A means for
    deciding who gets
    what of available
    resources and
    goods

    Self Test Questions


    1. Scarcity is the condition of finite
    resources. True or false? Explain your
    answer.
    2. How does competition arise out of
    scarcity?
    3. How does choice arise out of scarcity?

    5
    Marginal Benefits

    Additional benefits. The benefits


    connected to consuming an additional
    unit of a good or undertaking one
    more unit of an activity.

    Marginal Costs

    Additional costs. The costs connected


    to consuming an additional unit of a
    good or undertaking one more unit of
    an activity.

    Decisions at the Margin

    Decision making characterized by


    weighing the additional (marginal)
    benefits of a change against the
    additional (marginal) costs of a
    change with respect to current
    conditions

    6
    Efficiency
    Marginal Benefits = Marginal Costs

    Unintended Effects
    A positive or negative outcome that was
    not anticipated

    Exchange/Trade

    The process of giving


    up one thing for
    another.

    7
    Self Test Questions
    1. Give an example to illustrate how a change in
    opportunity cost can affect behavior.
    2. There are both costs and benefits of studying. If
    you continue to study (say, for a test) as long as
    the marginal benefits of studying are greater
    than the marginal costs and stop studying when
    the two are equal, will your action be consistent
    with having maximized the net benefits of
    studying? Explain your answer.
    3. You stay up an added hour to study for a test.
    The intended effect is to raise your test grade.
    What might be an unintended effect of staying
    up an added hour to study for the test?

    Positive vs. Normative Economics


    Positive - The study of “what is” in
    economic matters.
    Cause Effect

    Normative - The study of “what should


    be” in economic matters
    Judgment and Opinion

    Microeconomics
    Microeconomics deals with human
    behavior and choices as they relate to
    relatively small units—an individual,
    a business firm, an industry, a single
    market.

    8
    Microeconomic Questions
    ~

    • How does a market work?


    • What level of output does a firm produce?
    • What price does a firm charge for the
    good it produces?

    Microeconomic Questions
    (continued)

    • How does a consumer determine how


    much of a good he or she will buy?
    • Can government policy affect business
    behavior?
    • Can government policy affect consumer
    behavior?

    Macroeconomics
    Macroeconomics deals with human
    behavior and choices as they relate to
    highly aggregate markets (e.g., the
    goods and services market) or the
    entire economy.

    9
    Macroeconomic Questions

    • How does the economy work?


    • Why is the unemployment rate
    sometimes high and sometimes low?
    • What causes inflation?
    • Why do some national economies
    grow faster than other national
    economies?

    Macroeconomic Questions
    (continued)

    • What might cause interest rates to be


    low one year and high the next?
    • How do changes in the money
    supply affect the economy?
    • How do changes in government
    spending and taxes affect the
    economy?

    Next

    10

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