COMMERCE 1BA3 Lecture Notes - Lecture 1: Marginal Utility, Marginal Cost, Opportunity Cost
7 May 2016
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Document Summary
Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have. Economics is the study of how society manages its scarce resources. Making decisions requires trading off one goal against another. Examples of tradeoffs: guns for butter - spending national money on defense or consumer goods, study time between subjects, efficiency vs. equity. Efficiency- the propensity of society getting the most it can from its scarce resources. Equity- the property of distributing economic prosperity fairly among the members of society. When government tries to slice pie into equal slices, the pie gets smaller : it is important to acknowledge tradeoffs because people are likely to make good decisions only if they understand the options they have available. Principle #2: the cost of something is what you give up to get. Opportunity cost of an item is what you give up to obtain the item.
