MGEA02H3 Lecture Notes - Lecture 1: Opportunity CostPremium
DepartmentEconomics for Management Studies
This preview shows half of the first page. to view the full 1 pages of the document.
MGEA02 – Lecture 1 – Opportunity Cost; Production Possibilities Frontier
Microeconomics – The study of individual markets in the economy
Economics – Social science that studies production, distribution, and consumption of goods and
oHow people make choices under conditions of scarcity and the outcome of those
●Land –Natural resources, water, air, etc.
●Labour - workers
●Capital (Equipment) – physical machinery, tools buildings, etc.
oThese resources are scarce relative to what’s needed and therefore choices need to
●The cost of taking an option/action is measured by the value of the next best alternative
oThe road not taken
oBased on scarcity of resources
●The value of the benefit that could have been generated.
oEx. The opportunity cost of going to university would be the ability to produce income
(working). Also, paying for residence if you were living at home before
oApartment rental, food , and entertainment costs are only a part of the opportunity
cost if they change
●Decisions are made according to opportunity cost.
oThe opportunity cost of student’s time during the day is very low that’s why we can go
to class during the day. Whereas the value of time for adults is higher during the day,
which is why most adults would be seen in evening classes.
You're Reading a Preview
Unlock to view full version