ECON 101 Lecture Notes - Lecture 1: Economic Surplus
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ECON 101 Full Course Notes
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Econ 101: the cost-benefit principle, evaluate a full set of cost/benefits for any choice, pursue that choice only if the benefits are equal to or exceed the cost. If the benefits are hard to quantify (priceless, emotional, pleasure, etc. : consider your willingness to pay the cost, convert to a common, understandable currency (money) Money is just a measuring stick, not the only possible method of calculation. Economic surplus: total benefits total costs = economic surplus, i. e. willing to pay for coffee, but the coffee only costs = surplus: barista only pays for the coffee that he sells for = . Framing: people make decisions based on how they are presented, i. e. employer must fire 6,000 employees. Management team comes up with a plan that saves 2,000 jobs. Another team provides a plan that firs ,000 employees. Same plan but, the first plan sounds more appealing than the second: framing should be ignored.
