[ECON 102] - Final Exam Guide - Comprehensive Notes for the exam (27 pages long!)
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ECON 102 Full Course Notes
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The study of purposeful decision making behavior by persons, firms, and governments. The science of optimization (best way to do something) The understanding of how human society functions. People are rational, people respond to economic incentives, and optimal decisions are made at the margin. Economists use the word marginal to mean an extra or additional benefit or cost of a decision. Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost, in symbols, where mb = mc. Marginal analysis involves comparing marginal benefits and marginal costs. Economic questions that every society must address because of trade offs: Models and tools: supply and demand, endogenous and exogenous variables, demand functions and supply functions. Solve the complexity problem (where do ham sandwiches come from?) Use prices to transmit information and create incentives. Create incentives that maximize private and social benefits.
