ECON 1BB3 Lecture Notes - Opportunity Cost, Tiger Woods, Freakonomics

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ECON 1BB3 Full Course Notes
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ECON 1BB3 Full Course Notes
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Document Summary

How people make decisions: people face tradeoffs. Equity (division of resources) versus efficiency (increase productivity: the cost of something is what you give up to get it. Also known as opportunity costs: rational people think at the margin. All additional costs and additional benefits: people respond to incentives. Governments and organizations do this to change your behaviour. How people interact: trade can make everyone better off. Trade makes some people better off, while others suffer. However, the benefits outweigh the costs/suffering: markets tend to increase efficiency. Centrally planned economies, for example, cuba, soviet union. Everyone works and everyone shares however, not efficient because there is no incentive. Markets work well when prices change because people respond to price changes and incomes. When markets are inefficient, governments step in: sometimes the government can eliminate market inefficiencies. Caused by an externality (outside effects on the purchase of the certain good or service)

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