ECON 0100 Lecture Notes - Lecture 3: Sunk Costs, Opportunity Cost, Comparative Advantage
Document Summary
Scarcity: labor, land, capital, technology, time: choice cost benefit analysis, cost what you give up. Opportunity cost highest valued alternative: cost benefit subtleties absolutes, not proportions, ignore sunk costs, decisions made at the margin; weight additional benefits and costs. Ppc 2 goods, fixed resources/technology, efficient production. Trade: different personal valuations, different pre-trade relative prices, trade between individuals, trade between individuals and firms, trade between nations. Comparative advantage who gives up less to produce a good: relative prices different pre-trade relative prices, sources government policy, technology, resource base, market structure, tastes, demographics. Two ways to compare the productivity: absolute more goods with same resource playing, comparative lower opportunity costs, basis for mutual gains. Law of supply: price goes down, quantity supplied goes down, price goes up, quantity supplied goes up, all else is fixed input prices, technology, expectations, price of production substitute, number of producers. Market equilibrium: quantity demanded = quantity supplied.
