ECN 104 Chapter Notes - Chapter 1: Invisible Hand, Opportunity Cost, Market Power
Document Summary
Economics is the social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity. Concept 1 ( facing trade-offs ): scarcity in relation to wants means you face trade-offs; there-fore, you have to make choices. You have to trade one goal to another. Concept 2 ( opportunity costs ): the cost of the choice you make is what you give up for it, or the opportunity cost. Concept 3 ( choosing a little more or less ): choices are usually made at the margin; we choose a little more or a little less of something. People make decisions by comparing costs and benefits. Concept 4 ( the influence of incentives ): the choices you make are influenced by incentives. When the price of one thing rises, people stop buying that thing as much and rely on something else.
