ECON 201 Lecture Notes - Lecture 1: Opportunity Cost, Market Failure, Market Economy
Document Summary
The principles of economics: the word economy comes from the greek word for one who manages a household , the management of society resources is important because resources are scare, scarcity: the limited nature of society"s resources. Principle 2: the cost of something is what you give up to get it: opportunity cost: whatever must be given up to obtain some item, accounting cost: what you have to pay anyways. Principle 3: rational people think at the margin: rational people: people who systematically and purposefully do the best they can to achieve their objectives, marginal changes: small incremental adjustments to a plan of action. Principle 4: people respond to incentives: incentive: something that induces a person to act. Principle 5: trade can make everyone better off: property rights: the ability of an individual to own and exercise control over scarce resources. Principle 7: government can sometimes improve market outcomes: 1.