Copyright © 2004 South-Western Thinking Like an Economist.
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Transcript of Copyright © 2004 South-Western Thinking Like an Economist.
Copyright © 2004 South-Western
Definition of Economics
"Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses."
--Lional Robbins"Economics is the study of how human
beings coordinate their wants and desires, given the decision making mechanism, social customs, and political realities of the society. “
--David Colander
"Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses."
--Lional Robbins"Economics is the study of how human
beings coordinate their wants and desires, given the decision making mechanism, social customs, and political realities of the society. “
--David Colander
Copyright © 2004 South-Western
Three Coordination Problems
1. What and how much to produce.
2. How to produce it.
3. For whom to produce it.
1. What and how much to produce.
2. How to produce it.
3. For whom to produce it.
Copyright © 2004 South-Western
Opportunity cost of x: the benefit forgone by undertaking x.
Apply: going to college, going to class, going to a movie.
Opportunity cost of x: the benefit forgone by undertaking x.
Apply: going to college, going to class, going to a movie.
Copyright © 2004 South-Western
Fundamental decision rule in economics
marginal benefit = marginal cost
Fundamental decision rule in economics
marginal benefit = marginal cost
Copyright © 2004 South-Western
Positive vs. normative economics.
The art of doing economics is the application of the knowledge learned in positive economics to the achievement of goals one has determined in normative economics.
Positive vs. normative economics.
The art of doing economics is the application of the knowledge learned in positive economics to the achievement of goals one has determined in normative economics.