01:220:102 Lecture Notes - Lecture 1: Free Rider Problem, Marginal Cost, Root Mean Square

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Barbara Crockett

Document Summary

Econ: using scienti c process to learn abt. how ppl make decisions (social science) 3 principles of econ: optimization, equilibrium, empiricism. Economists = seen as pessimistic; econ = based on scarcity (fundamental econ. problem; limited resources, unlimited wants; results in trade-offs) Econ = study of mankind in ordinary business of life. Opportunity cost = highest value alternative next in line to what you choose to do. We make cost-bene t analysis for every decision we make. Econ. shows how ppl must act if they want to attain de nite ends (doesn"t tell ppl how they should act, b/c everyone has diff. preferences & values) Doesn"t have accounting cost, but has an opportunity cost. Accounting pro ts = explicit cost, what you"re paying out of pocket. Opportunity cost = implied cost, what you"re giving up (i. e. : time) There are times when ppl optimize, and there are times when they don"t (not being rational)