Economics, 3rd edition
Daron Acemoglu, David Laibson, John A. List
Inhoudsopgave
1. The Principles and Practice of Economics...........................................................................................2
4. Demand, Supply, and Equilibrium.......................................................................................................4
5. Consumers and Incentives..................................................................................................................7
6. Sellers and Incentives.......................................................................................................................11
7. Perfect competition and the invisible hand......................................................................................15
8. Trade.................................................................................................................................................17
11. Markets for factors of production...................................................................................................22
12. Monopoly.......................................................................................................................................24
Four market structures (summary):......................................................................................................30
, 1. The Principles and Practice of Economics
Economics is the study of people’s choices
Economic agent = an individual (consumer, parent, student) or a group (government, army, firm) that
makes choices.
Scarce resources = things that people want, but the quantity that people want (if the resources were
being given away for free) exceeds the quantity that is available.
- Scarcity exists because people have unlimited wants in a world of limited resources
Consumers play a key role in this resource allocation process: we choose what we do with our time
and these decisions determine how scarce resources are allocated in the economy, to the consumers
who are able and willing to pay for them.
- Resource allocation organizes the technological and human resources available for a project
Economics is the study of how agents choose to allocate scarce resources and how those choices
affect society.
Economics can be divided into two kinds of analysis:
1. Positive economic analysis – what people actually do, describing what has happened or
predicting what will happen (objective)
2. Normative economic analysis – what people should do / what they are ought to do
(subjective)
a. In the cases where agents make mistakes, normative economic analysis can help
them realize their mistakes and make better choices in the future.
Two broad fields of study in economics:
1. Microeconomics – how individuals make choices, and how those affect prices, the allocation
of resources and the well-being of other agents: a small piece of the overall economy
2. Macroeconomics – the total economy (like percentage increase in overall prices e.g.)
Economics is based on three key principles:
1. People try to optimize: they try to choose the best available option (they don’t always
succeed though), weighing out the available information/knowledge/experience given – a
rational choice. To obtain this -> an agent needs to consider many issues:
o Trade-off – arise when some benefits must be given up in order to gain others
We face trade-offs whenever we allocate our time
o Budget constraints = the set of things that a person can choose to do/buy without
breaking their budget
Economists use budget constraints to describe trade-offs
o Opportunity costs = the best alternative use of a resource
What economists focus on while evaluating trade-offs
so what you end up doing (the first choice) means that you have to give
up on what your second option/choice was, so the second option is the
opportunity cost
o Cost-benefit analysis = a calculation that identifies the best alternative
Daron Acemoglu, David Laibson, John A. List
Inhoudsopgave
1. The Principles and Practice of Economics...........................................................................................2
4. Demand, Supply, and Equilibrium.......................................................................................................4
5. Consumers and Incentives..................................................................................................................7
6. Sellers and Incentives.......................................................................................................................11
7. Perfect competition and the invisible hand......................................................................................15
8. Trade.................................................................................................................................................17
11. Markets for factors of production...................................................................................................22
12. Monopoly.......................................................................................................................................24
Four market structures (summary):......................................................................................................30
, 1. The Principles and Practice of Economics
Economics is the study of people’s choices
Economic agent = an individual (consumer, parent, student) or a group (government, army, firm) that
makes choices.
Scarce resources = things that people want, but the quantity that people want (if the resources were
being given away for free) exceeds the quantity that is available.
- Scarcity exists because people have unlimited wants in a world of limited resources
Consumers play a key role in this resource allocation process: we choose what we do with our time
and these decisions determine how scarce resources are allocated in the economy, to the consumers
who are able and willing to pay for them.
- Resource allocation organizes the technological and human resources available for a project
Economics is the study of how agents choose to allocate scarce resources and how those choices
affect society.
Economics can be divided into two kinds of analysis:
1. Positive economic analysis – what people actually do, describing what has happened or
predicting what will happen (objective)
2. Normative economic analysis – what people should do / what they are ought to do
(subjective)
a. In the cases where agents make mistakes, normative economic analysis can help
them realize their mistakes and make better choices in the future.
Two broad fields of study in economics:
1. Microeconomics – how individuals make choices, and how those affect prices, the allocation
of resources and the well-being of other agents: a small piece of the overall economy
2. Macroeconomics – the total economy (like percentage increase in overall prices e.g.)
Economics is based on three key principles:
1. People try to optimize: they try to choose the best available option (they don’t always
succeed though), weighing out the available information/knowledge/experience given – a
rational choice. To obtain this -> an agent needs to consider many issues:
o Trade-off – arise when some benefits must be given up in order to gain others
We face trade-offs whenever we allocate our time
o Budget constraints = the set of things that a person can choose to do/buy without
breaking their budget
Economists use budget constraints to describe trade-offs
o Opportunity costs = the best alternative use of a resource
What economists focus on while evaluating trade-offs
so what you end up doing (the first choice) means that you have to give
up on what your second option/choice was, so the second option is the
opportunity cost
o Cost-benefit analysis = a calculation that identifies the best alternative
