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Midterm

Economics Chapters 1-4 Review (Micro)-Test 1

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Department
Economics
Course
ECO105Y1
Professor
Paul Cohen
Semester
Fall

Description
Economics Chapters 14 Review Micro Chapter 1 Whats in Economics for you Scarcity Opportunity Cost and Trade Economics How individuals businesses and governments make the best possible choices to get what they want and how these choices interact in the marketScarcity The problem that arises because we all have limited money time And energy Scarcity means every choice involves a tradeoffEvery dollar you spend involves choice and because of scarcity it must be a smart choices Opportunity Cost Cost of best alternative given upOpportunity Cost is the key to mutual benefits from tradeIn weighing the benefits and costs of any decision we compare what we get from each fork which what we give up from the other For any choice What we get Its true cost is what we have to give up to get it Incentives Rewards and penalties for choiceVoluntary Trade With voluntary trade each person feels that what he or she gets is of grater value then what he or she gives upWhen you trade money for coffee at Tims that is a voluntary exchange If you thought you would be better off keeping the money instead of the coffee you wouldnt pay If Tims werent better off with your money instead of coffee they wouldnt sell Absolute Advantage Ability to produce a product at a lower absolute cost than another producerComparative Advantage Ability to produce a product at a lower opportunity cost than another producer To determine comparative advantage it is best to use opportunity cost and measure it per unite of the product chosen Opportunity CostGive Up
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