ECON 200 Lecture Notes - Lecture 2: Unintended Consequences, Opportunity Cost, Ceteris Paribus

• School: University of Arizona
• Department: Economics
• Course: ECON 200
• Professor: Wayne Geerling

Document Summary

Incentives matter: life is about trade-offs, opportunity costs, marginal thinking, trade. Not shortage: shortage is demand greater than supply. Economics is the study of how people allocate their limited resources to satisfy their unlimited wants. Direct incentives: intended consequence (500 dollars for straight a"s) trying to achieve. Indirect incentives: finding the loophole (unexpected but might happen) Unintended consequences: unplanned result (usually negative and unwanted) of an incentive (bottom team gets first pick so teams tank on purpose) Governments face trade-offs: cut less important areas of spending health, education, infrastructure, welfare, defence, etc. Highest valued alternative that must be sacrificed in oorder to get something else. (what you"re missing out on by the present activity that has the higher importance) Value of the tradeoff is represented by opportunity cost. Is the benefit of 1 more unit of something greater than the cost. Trade and comparative advantage: being good at something within a group or.