ECON 208 Chapter Notes - Chapter 1: Resource Allocation, Opportunity Cost, Invisible Hand

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Paul Dickinson

Document Summary

Many challenges faced in the world are primarily economic: The study of the use of scarce resources to satisfy unlimited human wants. Scarcity is inevitable and central to economic problems. Labour - all mental and physical human resources (entrepreneurial activity and management skills) Capital - all manufactured aids to production such as tools, machinery, buildings Resources are factors of production: - used to produce things people desire. Making goods = production and the act of using them = consumption. Goods are valued to the services they provide. Ex: car satis es owners need for transportation, mobility and possibly status. Scarcity implies that choices must be made, and making choices implies the existence of costs. Opportunity cost: the loss of potential gain from other alternatives when one alternative is chosen (the cost using resources for a certain purpose, measured by the bene t given up by not using them in their best alternative use)