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Chapter 1 Why Economics?

Chapter 1 Why Economics?. These slides supplement the textbook, but should not replace reading the textbook. Who is an economist?. Persons learned in the science and practices of economics. What is the economic problem?.

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Chapter 1 Why Economics?

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  1. Chapter 1Why Economics? These slides supplement the textbook, but should not replace reading the textbook

  2. Who is an economist? Persons learned in the science and practices of economics

  3. What is the economic problem? Because we live in a world of scarce resources, but people have unlimited wants and needs, how do we meet their needs in this world of scarcity?

  4. What assumption do we make? People behave in accordance to their own self interest

  5. What is rationale self interest? People select the alternatives they expect will yield the most satisfaction and happiness

  6. What isopportunity cost? That which is given up in the best alternative when a choice is made

  7. How is opportunity cost estimated? Opportunity cost is subjectively estimated by the individual decision maker

  8. What is the opportunity cost of a city to use local taxes to pay for a park? The best alternative foregone by not building the park

  9. What is your opportunity cost of attending college? If you make $300 a week, but you expect you could make $500 without school - your opportunity cost is $200

  10. What is the opportunity cost of cleaning your room? It’s greater on sunny days than on rainy days

  11. What ismarginal analysis? You will decide to do something if your marginal benefit exceeds your marginal cost

  12. What is macroeconomics? The study of the economic behavior of entire economies

  13. What is microeconomics? The study of the economic behavior in particular markets, such as the market for computers

  14. What is a market? A set of arrangements through which buyers and sellers carry out exchange at mutually agreeable terms

  15. What is special about the market? Unless there is a market transaction we are not concerned about it in economics

  16. What is a good? A tangible item that is used to satisfy wants

  17. What is a service? An intangible activity that is used to satisfy wants

  18. What is afree good or service? There is enough of a good or service to go around to everyone who wants it for free

  19. What is a Scarce Good or Service? There is not enough of a good or service to go around to everyone who wants it for free

  20. When is a good or service scarce? When the amount people desire exceeds the amount available to them at a zero price

  21. What is a resource? Something that is used to produce goods and services

  22. What are some examples of resources? • Land • Labor • Capital • Entrepreneurship

  23. What is land? Plots of ground and other natural resources used to produce goods and services

  24. What islabor? The physical and mental efforts of humans used to produce goods and services

  25. What is capital? Buildings, equipment, and human skills used to produce goods and services

  26. What is human capital? The skills used to work with capital

  27. What does money allow you to do? Make choices

  28. What isentrepreneurial ability? Managerial and organizational skills combined with the willingness to take risks

  29. Entrepreneur characteristics? • has a dream • overcomes obstacles • delayed gratification • is a risk taker • can duplicate himself • strives to be unimportant

  30. Why can the entrepreneur have more free time, make more money, and have more security than an employee? A business owner can duplicate himself

  31. How can you duplicate yourself? • employees • rental property • savings in a bank • owning shares of stock

  32. Why is Duplication the flip side of debt? Life is either an adding to or a taking away, growth is adding to, not growing is taking away

  33. What are two basic laws of entrepreneurship? • What ever you have you will be given more, and what you do not have will be taken away • Whatever you give away you keep and whatever you keep you lose

  34. Is economics more like history or math? It is like math, know the vocabulary, understand the concepts, and use your logical thinking

  35. What is the rule of man? Events are determined by whoever is in authority

  36. What is the rule of law? Events are determined by law

  37. What is a democracy? The majority rules What is a danger in a democracy? The majority can take everything away from the minority

  38. What is a republic? A political system based on law What is the purpose of a republic? To protect the minority from the majority

  39. What is a democracy in a republic? A political system where there is a balance between a democracy and a republic

  40. What is a positive economic statement? A statement that can be proved or disproved by reference to facts

  41. What is a normative economic statement? A statement that represents an opinion, which cannot be proved or disproved

  42. More or less government? Choices are not clear cut

  43. Why did Europeans come to America in 1492? To flee the autocratic policies of government and the catholic church

  44. Why was America a colony of England in the 1600s and 1700s? To enrich England in terms of gold and silver

  45. What is Mercantilism? The belief that gold and silver constituted a nation’s wealth

  46. What role did the government play under mercantilism? Government had to play a large role in economic affairs, a strong central government was supported

  47. How does a country enrich itself? It encourages exports and discourages imports

  48. What was the East India Company? A company which the English government gave monopoly power to buy certain raw materials from Americans at low prices

  49. What is a good book on the subject? Merchant Kings: when Companies Ruled the World, 1600-1900 by Stephen R Bown

  50. What else did the English government do? It forbid Americans from manufacturing, therefore forcing them to purchase goods from England

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