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[ECN 104] - Final Exam Guide - Everything you need to know! (47 pages long)


Department
Economics
Course Code
ECN 104
Professor
Tsogbadral Galaabaatar
Study Guide
Final

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Ryerson
ECN 104
FINAL EXAM
STUDY GUIDE

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ECN104 MIDTERM NOTES
Khyati Gandhi
FEBRUARY 25, 2017
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Gandhi, 1
Chapter 1: Ten Principle of Economics
Economics is about…
Scarcity: The limited nature of society’s resources
Natural Resource, land and workers’ time are all limited in its availability.
Economics: is about how the society manages its limited resources.
Firms: What to produce, how much to produce, how many workers to hire, etc.
Individuals: What to purchase, how much to save, how many hours to work, etc.
How People make Decisions
Principle #1: People face Trade-offs
To get one thing, we usually must give up something else.
Think of the allocations of your time and money etc.
If you buy a new iPhone today, you must wait before buying a new laptop
If you invest in TFSA, you are giving up other forms of investments, such as RESP and
RRSP
For every hour, you spend studying, you could have worked.
Society faces the trade-off between efficiency and equity.
Efficiency: getting the most out of resources.
Equity: fairness of economic allocation/prosperity
Efficiency can be referred to the economic pie, and equity to how the economic pie is divided
among society’s members.
Principles #2: The Cost of Something is What You Give Up to Get It
Opportunity cost: What you give up to obtain something.
To become a doctor, you need to go to medical school. In addition, you are giving up other
career paths.
Waiting in a long line for a free item costs your time.
“There is no such thing as free lunch.”
Principle #3: Rational People Think at the Margin
Rational People: Someone always try to do their best to achieve their objectives.
In economics, we usually assume that firms’ objective is to maximize its profit and consumers’
objective is to achieve the highest level of satisfaction
Marginal changes: small incremental adjustments to an existing situation or plan.
Rational people make decision by comparing marginal benefits and marginal costs.
Suppose you have already eaten 3 tacos. Whether to have an extra taco depends on price of
the taco (marginal cost) and the extra satisfaction it gives (marginal benefit).
To study one more hour the night before the exam has benefits and costs (less sleep).
Principle #4: People Responds to Incentives
Incentive: something, such as punishment or reward, that induces action.
Rational people responds to incentive
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