《Economics from Miss Chen》Chp1.pptVIP

Chapter 1 CHOICES: THE BASICS 1.1 INTRODUCTION Society What job will be done and who will do them grow food make clothing design computer software… Who will get the output of goods and service Who will eat caviar and who will eat potatoes; Who will drive Ferrari and who will take bus... 1.2 THREE CONCEPTS SCARCITY CHOICES OPPORTUNITY COST 1.2.1 SCARCITY Definition the limited nature of society’s resources. we seek to satisfy our many and varied needs and wants but our income is scare so we have to make choices about which needs and wants we will satisfy. Model an assumption + a constraint = a consequence NEEDS AND WANTS Needs: need to survive basic food, clothing, shelter Wants: would like to have but not for survive fast food, chic clothing, good music collection, tickets to rock concert… NEEDS Physiological needs to remain alive physically e.g. oxygen, water, basic food, shelter, refuge… Social needs to belong to the society e.g. TV set, radio, telephone… 1.2.2 CHOICE Time of students Income of family Guns and butter Efficiency and equity Time of students Income of family buy food, clothing family vacation retirement children’s college education Income wages or salaries interest profits dividends rent Efficiency The property of society getting the most it can from its scarce resource Equity The property of distributing economic prosperity fairly among the members of society Efficiency Concerned with inputs and outputs. An efficient firm products goods economically. It does things right. Doing the right things. This implies operating in attractive markets and making products that consumers want to buy. 1.2.3 Opportunity Cost Definition The value of that which be given up to acquire or achieve something. the cost expressed in terms of the next best alternative sacrificed. Helps us view the true cost of decision making Implies valuing different choices Examples Bill Gates picking up 100 dollars Going to the movies instead of studying Going to college Ben