ECON 101 Lecture Notes - Lecture 1: Opportunity Cost, Invisible Hand
Document Summary
Capitalism- system of relationships, people who own production and producers (employers and employees), produce a surplus that is not kept. Examples-going to a party the night before your midterm leaves less time for studying. Making decisions requires comparing the costs and benefits of alternative choices. The opportunity cost of any item is whatever must be given up to obtain it. Rational people- systematically and purposefully do the best they can to achieve their objectives. Make decisions by evaluating costs and benefits of marginal changes, incremental adjustments to an existing plan. Incentive- something that induces a person to act; the prospect of a reward or punishment; rational people respond to incentives. People can specialize in producing one good or service and exchange it for other goods; countries benefit from trade and specialization- get a better price abroad for goods they produce.
