Economics 101

Micro economics starts with the basic fact that each person has short term and long term goals, like buying a ham sandwich and graduating from college. People act in the world to accomplish something. Human action is purposive. You employ different means to achieve certain goals.

Rothbard begins with the simple situation of Crusoe – one laborer- on an island. Capital is everything used in production that is not land or labor. Production ends up with consumer goods which are consumed. The free market coordinates everything. No world planning board can do this. Micro economics is the study of how all this works. Resources are scarce not superabundant.

Humans prefer stuff now rather than later. This is called time preference. Preferences are ordinal, (a, b, c), not cardinal (1, 2, 3). Action is risky. The entrepreneur is a risk-taking capitalist.  Our discipline is qualitative, not quantitative. The Law of Diminishing Marginal Utility states that as a person increases consumption of a product, while keeping consumption of other products constant, there is a decline in the marginal utility that a person derives from consuming each additional unit of that product. The lower the price the more will be purchased. The higher the price the less will be purchased.

The first of eight sessions from Murray Rothbard's Economics 101 series.