ECON 219 Lecture Notes - Opportunity Cost

• School: McGill University
• Department: Economics (Arts)
• Course: ECON 219
• Professor: Christopher Ragan

Document Summary

Early economists noticed that the interaction of self-interested people creates a spontaneous social order the economy is self- organizing. Self-interest, not benevolence, is the foundation of economic order. Prices and quantities are set in (relatively) free markets in which individuals trade voluntarily. Institutions, created by the state, protect private property and enforce contractual obligations. Economics is the study of the use of scarce resources to satisfy unlimited human wants. Resources: a society"s resources are usually divided into land, labor, and capital, economists refer to resources as factors of production, out puts are goods (tangibles) or services (intangibles) Scarcity and choice: resources can produce only a fraction of the goods and services desired by people, scarcity implies the need for choice, every choice has an associated cost opportunity cost. Resources allocation determines the quantities of various goods that are produced. In terms of our previous illustration, what combination of civilian and military goods will be chosen.