Concordia University

• ECON 201

• Econ 201: Midterm review Chapters 1-6 Oct 28th Chapter 1: Intro to Key Ideas  Economics: is a social science that studies how we allocate limited resources to satisfy unlimited wants.  Allocation: distribute limited resources like money, labor, natural goods  Study of human behavior. Set of ideas & methods for the improvement of society. Study of Scarcity = Prioritization of choices. Study of choices thus there is always a trade off.  Macroeconomics: study of the economy as system in which feedbacks among sectors determine national output, employment and prices  Microeconomics: the study of individual behavior in the context of scarcity o Seeks to understand & explain how we make choices & how those choices affect our behavior in the workplace & society.  Critical element in making choices is that there is a scarcity of time or income or productive resources. Thus, decisions are subject to limits or constraints, which can make decisions both challenging and scientific. Also, concerns business choices (what to produce, sell it, produce it = earn profit)  Common goal: to do as well as he can, given the restraints imposed by the operating environment  Markets play a key role in coordinating choices of individuals with the decisions of business. Offer wide range of goods & services at various prices  Mixed Economy: goods & services supplied by both private sectors & the government  Individuals and firms have explicit objectives: to maximize their happiness/profit  Role of the government: to manage the economy through policy, redistribution through the tax-transfer system, the supplying of info to buyers and setting safety standards for products. Account for more than 1/ of economic activity in the modern mixed economy  The provisioning of the legal system enforces contracts and respects property rights or the private sector of the economy would diminish dramatically as a result of corruption, uncertainty and insecurity  Model: a formalization of theory that facilitates scientific inquiry o Incorporates key/meaningful elements and concurs reality. They are the frameworks we use to organize how we think about a problem o E.G wealth, income & household size determine a households expenditure  Theory: a logical view of how things work and is frequently formulates on the basis of observation  Opportunity Cost: what must be sacrifices when a choice is made (the dollar amount of the best alternative you passed up on) (not always constant) o Plays a determining role in marke