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Lecture 6

ECN 104 Lecture Notes - Lecture 6: Constrained Optimization, Opportunity Cost, Relative Price

Course Code
ECN 104
Teresa Fung

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ECN 104 week 1
- Economics is the study of the use of scarce resources to satisfy unlimited human wants
-time, money, food monetary, non-monetary
- Scarcity is relative to wants
- economics is about making choice scarce resources become valuable and we must
make a choice to maximize the use of it
- constraint optimization how to allocate resource in optimal way
- econ. Is the social science concerned with how induvial make optimal choices under the
condition of scarcity?
- add incentive to make consumers make choice
- scarcity implies choice, choice means options
- incentives change decisions. Once decision is made you incur opportunity cost
-opportunity cost in terms of the highest valued alternatives forgone. Some type of
ost, ot eessarily oey. Thig you did’t get, tie lost, etc. If the best choice is not
available then, The next best choice as alternative
the economic problem of a consumer
- limited income resource
- unlimited wants: bundle of goods/service what are the choices? What makes yours
different? One or more good/service window installation vs Windows AND doors.
-given 120$ to buy DVDs and books what are the options if the price of a DVD is 20 and
the book is 10? 120-resource 20 and 10- are the constraints
-6 DVDs, 0 books
-0 DVDS 12 books
-5 DVDS 2 books the opportunity cost to get 2 books is 1 DVD
-4 DVDs 4 books
-3 DVDS 6 books
-2 DVDS 8 books
-1 DVD 10 books
-the change of a vertical axis divided by the change of the horizontal line is rate
of change represented by a line graph
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