ECON 101 Lecture Notes - Lecture 1: Opportunity Cost

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7 Jun 2018
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Econ 101 Notes 1
Friday, August 25, 2006
Introduction to Microeconomics
- wants
- resources
- scarcity
- choices
- opportunity cost
- rational decision-making
- Scarcity means we have to make choices, and economics is the study of how we
make those choices
1. Economics relies on assumptions and the creation of abstract models to make things
easier to understand
Common assumptions used in Economics:
- Everyone acts in his or her own self-interest. That may mean that they do not
consider the effects of their actions on someone else.
- We also assume that people (consumers and producers) make informal decisions.
They know about prices of goods they buy, the availability of alternative goods,
and they know the characteristics of those goods.
2. Economics looks at the relationship between two variables, while assuming that all
other related variables do not change. Often the effects of changes in that number on
another variable are examined.
3. Economics thinks on the margin. We look at what happens when one variable
changes by one unit. What will be the effects on a related variable of that one unit
change?
- Part of thinking on the margin is the comparison of costs and benefits when
making rational decisions.
Example (Opportunity Cost): the cost of attending Vanderbilt is not just tuition
based, but involves everything else that is compromised by attending the school.
Opportunity Cost includes all things lost by making a choice.
Things to take into account with clicker questions:
- Opportunity Cost
- Sunk Cost in the past. Not going to change if we decide to do something.
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ECON 101 Full Course Notes
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Document Summary

Scarcity means we have to make choices, and economics is the study of how we make those choices: economics relies on assumptions and the creation of abstract models to make things easier to understand. Everyone acts in his or her own self-interest. That may mean that they do not consider the effects of their actions on someone else. We also assume that people (consumers and producers) make informal decisions. Often the effects of changes in that number on another variable are examined: economics thinks on the margin. We look at what happens when one variable changes by one unit. Part of thinking on the margin is the comparison of costs and benefits when making rational decisions. Example (opportunity cost): the cost of attending vanderbilt is not just tuition based, but involves everything else that is compromised by attending the school. Opportunity cost includes all things lost by making a choice. Things to take into account with clicker questions:

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