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Rob's 1010 Notes

👨‍🏫 Notes on E-1000 Lecture 1

The Central Questions of Economics

  1. What gets produced? (firms choose quantities or shut down, etc.)
  2. How does it get produced?
  3. Who gets what is produced? (demand) In other words, how does a society deal with scarcity?
Adam Smith quote: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner,…

The Essence of a Market System:
Self-interest, checked by competition, within a framework of law

Four Central Concepts of Economics

  • People are Rational
  • People Respond to Incentives
  • Every Decision Involves an Opportunity Cost
    • An opportunity cost is “everything that you give up” when choosing an option.
  • The Best Decisions are Made by Thinking “at the Margin”
    • To decide how much to produce, just compare Marginal Revenue vs. Marginal Cost
    • Produce whenever MR≥MC

Microeconomics - studies decisions of individual consumers (D), firms (S), and markets
Macroeconomics - studies entire economies/country all at once (unemployment rate, GDP, inflation, etc.)