MAE101 Economics

studies indivudial choices and their impact in specific context, e.g. consumer and business choices and their impact in specific market and industries

examines determinants of overall economic activity, unemployment, growth, inflation; Impact of fiscal and monetary policy choices

limited resources, we have to give up something in order to have something else (opportunity costs).

As individuals we face constraints such as limited income and limited time, as an economy --> limited resources and knowledge

this creates scarcity, therefore we face opportunity cost

the value of the best alternative given up when making a choice.

due to scarcity we face trade-off's

The PPF is a boundary that shows the alternative combinations of the two goods that can be produced:

- all available resources are fully allocated
- resources are used in the most efficient way

always downward sloping as resources are limited

if a point is below PPF curve then it is inefficient (but attainable)
if a point is above PPF curve then it is unattainable
--> therefore, trade-off's are faced and decisions must be made

As we move from above to the bottom on the PPF, opportunity cost increases
 

statement is objective in nature, validity can be tested

statement includes value judgement, that can be subjective (should can be a hint)