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Econamics

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1. Introduction to Course and Economics
1. Economics Defined - Economics is the study of the ALLOCATION of SCARCE resources to
meet UNLIMITED human wants.
a.Microeconomics-isconcernedwithdecision-makingbyindividual economic agents such as firms
and consumers. (Subject matter of this course)
b.Macroeconomics-isconcernedwiththe aggregate performance of the entire economic system.
(Subject matter of the following course)
c. Empirical economics - relies upon facts to present a description of economic activity.
. d.Economictheory-reliesuponprinciplestoanalyzebehaviorofeconomic agents.
e. Inductive logic - creates principles from observation.
f. Deductive logic - hypothesis is formulated and tested.
2.Usefulnessofeconomics-economicsprovidesanobjectivemodeofanalysis, with rigorous models
that are predictive of human behavior.
a. Scientificapproach
b. Rationalchoice
3.AssumptionsinEconomics-economicmodelsofhumanbehaviorarebuiltupon assumptions; or
simplifications that permit rigorous analysis of real world events, without irrelevant
complications.
a.modelbuilding-modelsareabstractionsfromreality-thebestmodelis the one that best describes
reality and is the simplest B Occam=s Razor.
b. simplifications:
1.ceterisparibus-meansallotherthingsequal.
2.Thereareproblemswithabstractions,basedonassumptions. Too often, the models built are
inconsistent with observed reality - therefore they are faulty and require modification.
3.When a model is so complex that it cannot be easily communicated or its implications easily
understood - it is less useful.
4. GoalsandtheirRelations-
a.POSITIVEeconomicsisconcernedwithwhatis;
b.NORMATIVEeconomicsisconcernedwithwhatshouldbe.
1.Economicgoalsarevaluestatements,hencenormative.
c. Economics is not value free, there are judgments made concerning what is important:
1.Individualutilitymaximizationversussocialbetterment
2. Efficiencyversusfairness
3. Moreispreferredtoless
d.Mostsocietieshaveoneormoreofthefollowinggoals,dependingon historical context, public
opinion, and socially accepted values :
1. Economicefficiency,
2. Economicgrowth,
3. Economicfreedom,
4. Economicsecurity,

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1. Introduction to Course and Economics 1. Economics Defined - Economics is the study of the ALLOCATION of SCARCE resources to meet UNLIMITED human wants. a.Microeconomics-isconcernedwithdecision-makingbyindividual economic agents such as firms and consumers. (Subject matter of this course) b.Macroeconomics-isconcernedwiththe aggregate performance of the entire economic system. (Subject matter of the following course) c. Empirical economics - relies upon facts to present a description of economic activity. . d.Economictheory-reliesuponprinciplestoanalyzebehaviorofeconomic agents. e. Inductive ...
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Awesome! Perfect study aid.

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