ECON 040 Lecture Notes - Lecture 7: E.G. Time
10 Aug 2020
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Document Summary
The study of how people make choices under conditions of scarcity and of the results of those choices for society. Must compromise some desires to have others as resources cannot accommodate for all desires. Microeconomics the study of small economic units (households, firms, industries) Macroeconomics the study of the aggregate economy as a whole (totals) Model assumptions: only 2 possible activities, only 2 individuals, no transaction costs (negotiation/transportation costs, no other barriers (import quotas, tariffs) Alberto has 2 productive activities: collecting bananas and catching rabbits. Performing an activity involves use of resources. 1kg bananas takes 1 hour to collect. 1kg rabbits takes 2 hours to catch. Therefore, each rabbit costs 2 bananas, each banana costs a rabbit (choice) Amount of resources used to perform a productive activity determines productivity. Resources are scarce constrained environment (financial constraints, time constraints) Time constraint: 24h/day 8h sleep = 16h productive time. 16h collecting bananas = 16kg bananas + 0kg rabbit.
