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Lecture 1

ECN 104 Lecture Notes - Lecture 1: Opportunity Cost, Marginal Cost, Birds Eye View


Department
Economics
Course Code
ECN 104
Professor
Teresa Fung
Lecture
1

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Introductory Microeconomics Week 1 Introduction Basic Concepts
o Economics is the study of the use of scares resources to satisfy unlimited human wants
o Economics is the social science concerned with the efficient use of scarce resources to
obtain maximum satisfaction of societys unlimited wants
o Economics is looked as the art of making good choices
o Economics is the social science concerned with how individuals, institution, and society
make optimal (best) choices under conditions of scarcity
o Economics is the social science that studies the choices that individuals, businesses,
governments, and the entire societies make as they cope with scarcity and the incentives
that influence the reconciles those choices
Basic Economic Concepts
o Scarcity choice
o Incentives Decisions Opportunity Cost
o Opportunity Cost (in terms of the (highest valued) alternatives foregone
The Economic problem of a Consumer
o Limited income
o Unlimited wants: bundle of goods/services
o The budget Line: list of the options
o Example: Given $120 to buy DVDs and books, what re the options if the price of DVD is
$20 and the price of the book is $10
o Budget line: shows the possible combinations of DVDs and books which can be
bought with $120 given prices of the two products (DVD and book)
DVD ($20)
BOOK ($10)
TOTAL EXPENDITURE
6
0
120 = 120+ 0
5
2
120 = 100 + 20
4
4
120 = 80 + 40
3
6
120 = 60 + 60
2
8
120 = 40 + 80
1
10
120 = 20 + 100
0
12
120 = 0 + 120
Insert graph where dvd is x and books are y
o What is within the graph is attainable and whatever is outside is
unattainable
o Equation for the budget line: 20y + 10x = 120
o y = (120/20) (10/20)x = 6 0.5 x
“There is no free lunch”
o Resources are used to produce goods and services
o These resources have alternative uses
o Society gives up something else to get the “free” good produced
o Free to individuals but never free to society
find more resources at oneclass.com
find more resources at oneclass.com
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