ECN 204 Lecture Notes - Atkins Diet, Substitute Good, Demand Curve
8 May 2012
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Principle 1 -people face trade offs (we make choices). Principle 2 opportunity cost is the choice you give up to achieve another one. Principle 3- rational people think at the margin. Making decisions that make you happier, thinking at increments. (extra, additional). Comparing the extra cost and the extra benefit. (going to school an extra four years). An incentive is something that induces a person to act i. e. an reward or punishment. (paying students 20$ to attend class. Principle 5 trade can make everyone better off if you do something your good at and trade it with someone else that specializes in something they are good at, it benefits everybody. Principle 6 markets are usually a good way to organize economic activity. To allow people to produce and consume whatever they want. Adam smith introduced the invisible hand to show an invisible notion of how the market allocates. Principle 7 governments can sometimes improve market outcomes.
