GEN BUS 310 Lecture 2: Module 2: Motivations and Gains From Trade
8 Feb 2017
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Document Summary
Microeconomics- the allocation of scarce resources among small units in the economy. Scarce resources mean that not all desires can be fulfilled. Choices are based off of 1) individuals act with goal-oriented behavior and 2) individuals exhibit rational behavior. Scarce resources are often allocated through participating in markets- the interaction of buyers and sellers resulting in exchange of goods and service at an agreed-upon price. Opportunity cost- the cost of buying or doing something is the total value that one forgoes in purchasing the product or undertaking the activity of that one thing. Explicit costs- direct monetary expenditures on an activity that could have been spent on a different activity. Implicit costs- forgone opportunities (of putting time into one thing, rather than the next best alternative) Costs are not just direct monetary expenditures, but also sacrificed alternatives. For firms making production decisions, explicit costs are those that are usually counted as costs in conventional accounting statements.
