Macro notes

Money is a medium- exchanging money for coupons rendering goods and services.
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Economic way of thinking
1. What is economics all about?
2. What skills do you need to succeed in the job market?
-Communication skills
-Time management
-Analysis
-Problem solving
-Critical Thinking
-Technology
3. Economics all around us. Everything we do involves economic way of thinking.

Three big macroeconomic questions
What to produce?
How to produce?
For whom to produce?

Define Economics
-is the study of how the society allocates its scarce and limited resources to produce goods and services to satisfy our unlimited wants and desires.
-labor has two components- human capital, land
-capital- anything you use to produce other goods
-entrepreneur- risk taker and opportunists, innovators
-How society deals with scarcity, and choices made as result of scarcity in a society.
-Society
-allocation(efficiency vs. equality)
-
Do we always face scarcity? Economics is the science of greed
-Unlimited wants and desires and limited resources
	Economics is the science of greed. -F.V. Meyer
-It forces us to make choices(Rational Choices)
logic is making choices based on cost benefit and reasoning
All choices involves making sacrifices.
We have to give up the next best choice
There are no free lunches in economics

Self-Interest and Social Interest
When is the pursuit of Self-Interest in the Social Interest?
-Self-interest: The choices that are best for the individual who makes them.

Can choices made in self-interest also serve the social interest?
Yes:
1. Free Market and Wealth creation.
	Hard work, honesty, integrity
No:
1. Slavery and human exploitation
2. Globalization and international outsourcing (Maximize Profit)
3. Consumer perchases(Best Value) and businesses lowest cost

Define Macroeconomics and Microeconomics
Macroeconomics
	The study of the aggregate(or total)effects on the national economy and the global economy of the choices made by individualc, businesses, and governments.

Microeconomics
	The study of how individuals, businesses and government make decisions. Instead of looking at the big picture, microeconomics is looking at problem solving.

Why do economists disagree?
Harry Truman once jokingly exclaimed, Find me an economist with one hand.

1. Normative statements(Value: what ought to be)
2. Positive statements(Facts: What is)

Economic analysis and model building
1. State Your hypothesis
	Acquiring more education and training leads to higher income
2. Collect data
3. Analyze data
4. Make predictions and state your conclusion

Ceteris Parabus
A Latin phrase that means while certain variables can change, "All other tings remain same"
1. Independent variable(Education)
2. Dependent variable(income)
3. Third variable or background variable
4. Graph represents the relationship between two variables( positive, negative, constant)
5. Ceteris Paribus(family, etc.)

Opportunity cost
	The next best thing that you must give up to get something- the highest-valued alternative forgone.

Cost benefit analysis
1. Cost: What you MUST give up
2. Benefit: what you gain or pleasure you derive from a choice

Responding to Incentives
An incentive is a reward or a penalty- a carrot or stick that encourages or discourages an action