ECON 201 Lecture Notes - Lecture 1: Opportunity Cost, Market Power, Externality
Document Summary
Scarcity: the limited nature of society"s resources. Efficiency: when society gets the most from its scarce resources. Equality: when prosperity is distributed uniformly among society"s members. Tradeoff: to achieve greater equality, could redistribute income from wealthy to poor. But this reduces incentive to work and produce, shrinks the size of the economic pie . The cost of something is what you give up to get it. Making decisions requires comparing the costs and benefits of alternative choices. The opportunity cost of any item is whatever must be given up to obtain it. It is the relevant cost for decision making. Seeing a movie is not just the price of the ticket, but the value of the time you spend in the theater. Systematically and purposefully do the best they can to achieve their objectives. Make decisions by evaluating costs and benefits of marginal changes, incremental adjustments to an existing plan. (marginal: extra spend, extra paid, additional, one additional step)