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ECON 1B03 (523)
Lecture 2

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Hannah Holmes

Lecture 2 Notes Microeconomics focuses on the individual parts of the economy (households and firms). A market economy is one that allocates resources through the decentralized decisions of firms and households. - Firms and households get to make decisions without any interference (government, etc). A command or centrally planned economy is one where all production and distribution decisions are made by a central authority (government). - Soviet Union Canada is a mixed economy, with a little bit of both. A resource is anything that can be used to produce something else. - Land, labour, and capital (buildings/machinery). Opportunity Cost is the cost of everything you have to give up to get something else. - The cost of the best forgone alternative Marginal Thinking Marginal changes are small adjustments to an existing plan of action. - They motivate people to respond - People make decisions by comparing marginal benefits to marginal costs Adam Smith (late 1700’s) – the father of economics. Wrote “The Wealth of Nations”. Gains from Trade We specialize in tasks we do bes
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