1. 1. Define “scarcity” 2. What are the four factors of production? 3. What is the difference between “labor” and “human capital”? 4. What is a trade-off? 5. What is opportunity cost?

2. MICROeconomics-  Study of small economic units such as individuals, firms, and industries (ex: supply and demand in specific markets, production costs, labor markets, etc.) MACROeconomics-  Study of the large economy as a whole or economic aggregates (ex: economic growth, government spending, inflation, unemployment, international trade etc.)

3. Positive Statements Based on facts. Avoids value judgments (what is). Normative Statements Includes Opinions (what I believe ought to be).

4.  Consumer Goods – Products and services that directly satisfy human wants (Cheeseburger, Eye Exam).  Capital Goods – Goods that indirectly satisfy human wants in the future (factory, screwdriver).

6. Marginal analysis sounds complicated…it’s not! Good news, you do it everyday, you just didn’t know what it was called.

7. What does the word “marginal” mean in Economics? ADDITIONAL Every time we make a decision, we have to decide if the marginal benefits outweigh the marginal costs. We always make a decision if its marginal (additional) benefits outweigh its marginal costs.

8. How many times would you see the movie? Notice that the total benefit is more than the total cost but you would NOT watch the movie the 3 rd time.

9.  What is “utility”?  Utility: The amount of satisfaction you receive from consuming an additional unit or doing an additional activity  Utility = Benefits – Cost.

10.  How many “utils” of enjoyment do you receive from watching 1 more/2 movies/3 movies?

11.  As consumption increases, there is a decline in the marginal utility that a person derives from consuming each additional unit of that product.

12. You have been shopping at the mall for a half hour, the additional benefit of shopping for an additional half-hour might outweigh the additional cost (the opportunity cost). After three hours, the additional benefit from staying an additional half-hour would likely be less than the additional cost.

13. Notice that the decision making process wasn’t “should I go to the mall for 3 hours or should I stay home” In reality the decision making process started with “should I go to the mall at all.” Once you are there you thought “should I stay for an additional half hour or should I go.” You will continue to do something as long as its marginal benefits outweigh its marginal costs!!!