MAE101 Topic 1 - Economic Principles

MAE101 Topic 1 - Economic Principles

1. Economics is a science:

   • Theory - tries to explain events in the real world.
   • Data - does the data confirm/reject the testable propositions
   • a social science
     • Economics is the study of how we make choices.
     • We collect data based on peoples actual decisions or behavior.

2. the study of how society allocates scarce resources.

3. Positive vs Normative Statements

   • Positive - statements based on fact or something that can be proven
   • Normative - statements based on opinions

4. Allocation Methods

   • Price - good allocated willing and able to pay
     • ie. cars, house
   • First-in Best-Dressed - arrives first/sooner, even if later-arriving individual willing and able to pay more for it
     • ie. parking spaces
   • Set Aside/Qualification (equity) - individual who meets certain pre-determined criteria
     • ie. University, Handicapped parking
   • Lottery - winner(s) of the lottery