MTH 310 Lecture Notes - Price Floor, Price Ceiling, Economic Equilibrium
Document Summary
Economics: the study of how society manages its scares resources (limited) Gov"t faces a trade-off between guns and butter: guns = needed for defense, butter = public works/research/development. Principle 2: the cost of something is what you have to give up to get it: opportunity cost: whatever must be given up to obtain some item. Incentive: something that induces a person to act: ex. a tax on gasoline encourages people to buy smaller, more fuel-efficient cars. Principle 5: trade can make everyone better off: trade can make countries better off. Principle 6: markets are usually a good way to organize economic activity: market economy: an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Principle 9: prices rise when the government prints too much money. Inflation: an increase in the overall level of prices in the economy.
