Economics: What Is Economics And The Three Economic Fallacies
Introduction to Economics
In order to understand Economics, you need to understand scarcity.
Scarcity is the idea or notion that we have unlimited wants and needs, but limited number of resources to fill them.
Economics: Science of scarcity and choice.The way that any community makes choices as to how they’re going to use the scarce resources.How given communities decide to use their resources.The choices they make.
Opportunity Cost: Sum of all that is lost for by taking one course of action over the other that could be accomplished in the same period of time.
I.e.Pick between working for 4 hours and make 40 dollars or go to the movies with a girl for 3 hours and spend 30 dollars or stay at home with your mom and make her happy by playing monopoly.You have to weigh every option.
Economic Fallacies
1.Fallacy of Composition
The assumption that what is good for the individual is automatically good for society as a whole.
I.e.If the Canadian dollar became higher than the American dollar, it would be good for shoppers who decided to go to America to buy things.In retrospect, retailers would be upset because they lose money to places with lower currency.Tourist/service/entertainment places would be upset because we became more expensive for tourists.Personal example of economic fallacy is becoming president: I’m happy and some people are happy for me but not everyone wants me.
2.Post Hoc Fallacy
The assumption that what happens before is automatically the cause of what occurs after.0% correlation
Everything isn’t correlated.Event A occurred, and then B, and people say the two things are related.I.e.someone comes late for a team try out, gets cut and believes that he got cut for the sole reason of him being late, while in reality the coach didn’t even notice his lateness but cut him based on skill.
3.Fallacy of Single Causation (Oversimplification)
The assumption that one person or one event was the sole cause of a particular event to occur.
People assume there was one reason for something when there really are more.I.e.people believe the reason that the world went into a recession was because the twin towers got crashed into by two planes, while in actuality the twin towers have some responsibility on the economic state, but there’s a lot more to do with it then just that.
Fallacy of Single Causation has partial % of the cause of responsibility while post hoc fallacy doesn’t.