ECON 2105 Lecture Notes - Lecture 1: Tax Refund, Opportunity Cost, Comparative Advantage
Document Summary
Economics is the study of how people allocate their limited resources to satisfy their nearly unlimited wants- the study of how people make decisions. The five foundations of economics: incentives matter, life is about trade-offs, opportunity costs, marginal thinking, trade creates value, incentive mater- Incentives are factors that motivate you to act or exert effort. Tax refund, pay raise, extra credit etc: negative incentives. Taxes, jail, fees, fines, failing class etc: direct incentives, indirect incentives, trade off: It is when we sacrifice one thing to obtain another. Governments face trade-offs as well: spend tax dollars on education or the highway system, opportunity cost: It is the highest-valued alternative that must be sacrificed in order to get something else. Or, the cost of something is what you give up to get it. Opportunity cost of going to the mall: lost opportunity to go to the pool.
