ECON 2105 Lecture Notes - Lecture 3: Marginal Cost, Opportunity Cost, Comparative Advantage
Document Summary
Decision-making key: minimize opportunity cost by selecting the option that has the largest benefit, go to whichever you enjoy more, the pool or mall: marginal thinking, economic thinking. Requires a purposeful evaluation of available opportunities to make the best decision: marginal thinking. Go to college if marginal benefits are greater than marginal cost: trade creates value, markets. Bring buyers and sellers together to exchange goods and services: trade. The voluntary exchange of goods and services between two or more parties. You don"t engage in trade if it makes you worst off. Comparative: without trade, you would have to produce everything you consume. Comparative advantage: the situation in which an individual, business, or country can produce at a lower opportunity cost than a competitor, allows gains from trade to occur. India or china may have a comparative advantage (relative to usa) in labor-intensive goods. Economists ask, and answer, big questions about life.