ECN 204 Chapter Notes - Chapter 1: Marginal Utility, Marginal Cost, Opportunity Cost

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Economics: the study of how society manages it scarce resources. How do people decide how much to work = time is a scarce resource, not enough time to do everything we want. There is a tradeoff; the more time we spend working, the higher our income but less time for leisure and vice versa. How do firms decide what kind of labor = unskilled or skilled workers. Skilled are more productive but unskilled are cheaper. How do firms decide how to produce = it depends on the price and the demand, the more demand the cheaper the product. Principles of how people make decisions: principle #1: people face tradeoffs. To get one thing we like, we usually have to give up another thing we like. Making decisions requires trading off one goal against another. Society faces an important trade off: efficiency vs. Efficiency: when society gets the most from its scarce resources.