ECN 104 Lecture Notes - Lecture 1: Market Failure, Opportunity Cost, Human Capital

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3 Nov 2016

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Individual choice: the decision by an individual of what to do, which necessarily. Basic principles behind individual choice: involves the decision of what not to do. The real cost of something is what you must give up to get it. How much? is a decision at the margin. People usually take advantage of opportunities to make themselves better off. Principle #1: choices are necessary because resources are scarce. A resource is anything that can be used to produce something else. Ex: land, labour, capital, human capital, time. Resources are scarce - the quantity available isn"t large enough to satisfy all productive uses. The true cost of an item is its opportunity cost. The real cost of an item is its opportunity cost: what you must give up in order to get it. the classroom during the lecture. Ex: the cost of attending an economics class is what you must give up to be in.

Related Questions

1. In making choices people find that a. resources are scarce and that that cannot do everything or have everything that they would like. b. the real cost of a choice is what you must give up in order to enjoy that choice. c. people make choices that will make them better off d all of the above are true.

Part 1

The term opportunity cost suggests that

A.	in any exchange situation where one person gains, someone else must lose
	B. not all individuals make the most of life's opportunities
C.	executives do not always recognize opportunities for profit as quickly as they should
	D.the only factor that is important in decision making is cost
E.	because goods are scarce, in order to get some good you must give up some other good in return

Part 2:

Which of the following is an example of division of labor?

	A.an author writing a book one chapter at a time
B.	a firm trying to get rid of a labor union
C.	separating resources into four categories: land, labor, capital, and entrepreneurial ability
D.	allocating revenue among a firm's resource suppliers
E.	dividing an assembly process into separate steps

Part 3:

In economics, specialization means

	A.producing something using only one type of resource, such as labor
B.	producing something using only one type of labor
C.	focusing efforts on a particular product or a single task
D.	producing only one unit of output
E.	producing something using only one unit of a variable resource

Please only anwer the Following question:

Question :focus in on one of the main concepts covered (e.g., scarcity, ceterus pariubus, association vs. causation, opportunity cost, marginal analysis, etc.), define it in your own words, and provide an example. Discuss why you think this is an important aspect in the study of economics.

Answer:

Scarcity is a situation where the availability of resources at our disposal is less then the needs of society.since human wants are unlimited and resources are limited therefore it gives rise to a problem of choice.

Example the oil resources are scarce in relation to Wants .

This is important in decision analysis of any economic problem as without it we are unable to judge which good to produce and sell in market.

Following question:

Can you comment on what you see as the relationship between scarcity, opportunity cost and trade off?

ECN 104 Lecture Notes - Lecture 1: Market Failure, Opportunity Cost, Human Capital

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