Class Notes (839,483)
Canada (511,363)
Economics (1,296)
ECN 104 (447)
Lecture

econ1.pdf

2 Pages
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Department
Economics
Course Code
ECN 104
Professor
Tsogbadral Galaabaatar

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Economics is about Scarcity: The Limited nature of society’s resources Natural resource, land and worker’s time re all limited in its availability Economics is about how the society manages its limited resources. Firms: what to produce, how much to produce, how many workers to hire, etc How people make Decisions Principle #1 People face tradeoffs -To get one thing, we usually have to give up something else. -Think of the allocations of your time and money. ▯ If you buy a new iPhone today, you have to wait before buying a new laptop ▯ IF you invest in a stock, you are giving up other forms of investments, such as ▯ RESP and bonds. ▯ ▯ For Every hour you spend on studying, you could have worked Society faces the tradeoff between efficiency and equity. Efficiency: Getting the most out of resources. Equity: fairness of economic allocation/prosperity Efficiency can be referred to the economic pie, and equity to how the economic pie is divided amount society’s members. Principle #2 The cost of something is what you give up to get it Opportunity cost: What you give up to obtain something. ▯ To become a doctor, you need to go to medical school. In addition, you are giving ▯ up other career paths. ▯ ▯ ▯ Waiting in a long line for a free item costs your time. ▯ ▯ ▯ There is no such thing as a free lunch Principle #3: Rational People think at the Margin Rational People: Someone always tries to do their best to achieve their objectives. In economics, we usually assume the firms’ objective is to maximize its profit and consumers’ objective is the achieve the highest level of satisfaction/ Marginal changes: Small incremental adjustments to an existing situation or plan. Rational people make decisions by comparing Marginal benefits and Marginal costs ▯ Suppose you have already eaten 3 tacos. weather to have an extra taco depends ▯ on the price of the taco (Marginal cost) and the extra satisfaction it gives ▯ (marginal benefit) To study one more hour the night before the exam has benefits and costs (less sleep) Principle #4 People Respond to incentives Incentive: something, such as a punishment or reward, that includes action.
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