ECON 1000 Lecture Notes - Marginal Utility, Opportunity Cost, Marginal Cost

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: George Georgopoulos

Document Summary

People make choices at the margin, which means that they evaluate the consequences of making incremental changes in the use of their resources. The benefit from pursuing an incremental increase in an activity is its marginal benefit. The opportunity cost of pursuing an incremental increase in an activity is its marginal cost. The efficient allocation of resources is achieved when the marginal benefit equal the marginal cost. For any activity, if marginal benefit exceeds the marginal cost, people have an incentive to do more of that activity. If marginal cost exceeds marginal benefit, people have an incentive to do less of that activity. Incentives are also the ket to reconciling self interest and the social interest. A positive statement can be tested using scientific facts. A normative statement is not possible to prove or test because it is an ideal scenario.