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Lecture 5

ECON-1007EL Lecture Notes - Lecture 5: Income Distribution, Barter, Normal Good


Department
Economics / Science Èconomique
Course Code
ECON-1007EL
Professor
Daviau Charles
Lecture
5

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Chapter 1-3 Key Terms
Individual Choice The decision by an individual of what to do,
which necessarily involves a decision of what
not to do. *4 basic principles
Resource Anything that can be used to produce
something else
Resources are scarce The quantity available isn’t large enough to
satisfy all productive uses
Opportunity Cost The real cost of something, what you must
give up in order to get it
Trade-off When comparing the cost with the benefits
of doing something
Marginal Decisions Decisions about whether to do a bit more or
less of an activity
Making trade-offs at the margin Comparing the costs and benefits of doing a
little bit more of an activity versus doing a bit
less
Marginal Analysis Study of decisions above (hiring one more
worker, studying one more hour, etc)
Incentive Anything that offers rewards to people who
change their behavior
Interaction of choices My choices affect yours, vice versa
Trade The practice in which an individual provides
goods and services to others and receive
goods and services in return
Gains from trade People can get more of what they want
through trade than they could if they tried to
be self-sufficient
Specialization Each person specializes in the task that he is
good at performing
Equilibrium An economic situation in which no individual
would be better off doing something
different
Efficient Description of a market or economy that
takes all opportunities to make some people
better off without making people worse off
Equity Fairness, everyone getting his fair share
Model Simplified representation of a real situation
that is used to better understand real life
situations
Other things equal assumption Means that all other relevant factors remain
unchanged
Production possibility frontier (PPF) Illustrates the trade-offs facing an economy
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