BUSS1040 Lecture Notes - Lecture 1: Sunk Costs, Decision-Making, Marginal Cost

• School: University of Sydney
• Department: Business Studies
• Course: BUSS1040
• Professor: Dr Katrien Stevens

Document Summary

Buss1040 lecture 1 notes (cid:858)i(cid:374)troductio(cid:374), gai(cid:374)s fro(cid:373) trade(cid:859) Economics is the study of choice under scarcity (unlimited wants, limited resources: hence, economics is the need of making choices (by consumers, business, governments, countries) Key issues: what to produce, how to produce it (methods of production, who should get it (allocation, how much to produce. Economics focuses on the behaviour of the players in these markets. Key concepts of economics: opportunity cost, choice under scarcity, gains from exchange/trade. If there are 3 or more choices, only the second best/next best alternative is the opportunity cost all other choices are irrelevant: opportunity cost refers to any decision when there are two choices. Opportunity costs include both explicit costs (direct payments) and implicit costs (extra opportunities/costs: total opportunity cost = explicit costs + implicit costs. Decision making is thinking at the margin comparing the marginal costs to the marginal benefits.