EC120 Lecture Notes - Opportunity Cost, Market Failure
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EC120 Full Course Notes
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Scarcity - the key issue, the limited nature of society"s resources. *trade-off - people must make decisions, taking into consideration what they are giving up by making that decision. Efficiency - when society gets the most from its resources. Equality - when prosperity is distributed uniformly among society"s members. Society"s trade-off - to achieve greater equality, could redistribute income from wealthy to poor, but this reduces incentive to work and produce, shrinks the size of economic pie . Ex. equality by raising taxes for the wealthy - they won"t be as motivated to continue to prosper: decision making: the cost of something is what you give up to get it. *opportunity cost - the amount that could"ve been gained by choosing an option"s best alternative - does not just consider dollar values, but also the value of time, results, etc.
