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Final

All Notes from Tresch's Microeconomics Course

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Department
Economics
Course
ECON 1131
Professor
Richard Tresch
Semester
Fall

Description
 Opportunity Cost -the value, in terms of the objectives, of the next best alternatives EXAMPLE-inherit a parking lot in San Francisco -brought in $400,000 in revenue -$50,000 out-of-pocket costs -$350,000 profit -could have sold lot for $10 million -invested $10 million at a 5% rate -annual income off interest would be $500,000 -this is $150,000 more than the parking lot would profit/year -$500,000=opportunity cost, next best alternative value Exchange  The trading of goods, services, and factors of production among the key players in an economy  Economics- the study of the allocation of scarce resources through the process of exchange Summary  Economic problem has three part structure consisting of objectives, alternatives, and constraints  Law of Scarcity says that people are constrained in trying to solve their economic problems. There are never enough resources to meet their objectives  Short definition of economics- study of how to best allocate scarce resources  Three key players of an economy: individual, business firm, government  Individuals have the role of consuming goods and services and providing factors of production to business firms  Business firms have the role of buying factors of production and producing goods and services for sale  Government agencies act as both consumers and producers in a market economy  Principle of Interdependence states that the consequences of economic decisions spread beyond the immediate concern of the decisions. A decision to choose one thing is a decision not to choose something else  Because economic decisions are interdependent, the true economic cost is the opportunity cost. The cost of making decision A is the value in terms of the objectives of the next best alternative B  Individuals, business firms, and governments attempt to solve their economic problems through the process of exchange  Expanded definition of economics- the study of the allocation of scarce resources through the process of exchange Chapter 2-Solving the Economic Problem Solving the Economic Problem: Efficiency and Equity  Economic analysis rests on the fundamental assumption that people are always striving to find the best possible solutions to their own economic problems
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