COMMERCE 1AA3 Lecture Notes - Lecture 1: Free Market, Market Economy, Externality
21 Mar 2016
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Document Summary
Microeconomics lecture 1: the study of how society manages its limited scarce resource. Scarcity: limited amount of resources: resources: anything we use to produce something. Three essential resources: land, labour, physical capital: microeconomics: focuses on the individual parts of the economy. Micro comes from the greek word mikros meaning little/small: macroeconomics: looks at the economy as a whole. Macro comes from the greek word makros meaning large: both categories divided into subcategories. How the economy works (not covering in class) The 7 principles of economics: people face trade-offs. Opportunity cost: the cost of something is what you give up to get it (i. e. the oc of full time schooling is giving up full time work) Implicit cost: money that has to be spent. Explicit cost + implicit cost = opportunity cost: rational people think at the margin. Rational people: consider costs and benefits of some action. Rational consumer will choose the most economical product in comparison to two products.
