BSL 212 Lecture Notes - Lecture 1: Inferior Good, Market Clearing, Comparative Advantage
22 Jun 2016
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Principle 1: people face trade offs: making decisions. Principle 2: the cost of something is what you give u[ to get it: people face trade offs. Whatever must be given up to obtain one item. Choosing colleges: when you choose to go to one college, you give up the opportunity to got o another college. Economists focus on explicit costs, but opportunity costs can involve other things besides monetary costs. Implicit costs: how you allocate your time, where you have to live. Principle 3: rational people think at the margin: rational people. Systematically and purposefully do the best they can to achieve their objectives: marginal changes. Small incremental adjustments to a plan of action. Marginal (incremental) cost for an orange is 40 cents. Buy 1 is 40 cents, buy 2 is 80 cents. You keep buying oranges until the marginal benefit goes down. Principle 4: people respond to incentives: incentive. Principle 5: trade can make everyone better off: trade.
