ECN 104 Chapter Notes - Chapter 1: Market Power, Invisible Hand, Externality

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22 Oct 2012
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Scarcity: the limited nature of society"s resources. Economics: the study of how society manages its scare resources: economists study how people make decisions: Study how people interact w/ one another: economists analyze forces & trends that affect economy as a whole. Making decisions requires trading off one goal against another. Ex. going to work for longer hours, which leaves less time for leisure. Making decisions requires comparing the costs and benefits of alternative choices. Opportunity cost: whatever must be given up to get some item. Ex. seeing a movie is not just the price of the ticket, but the value of the time you spend in the cinema. Principle #3: rational people think at the margin. Rational people: people who systematically and purposefully do the best they can to achieve their objectives. Marginal changes: small incremental adjustments to an existing plan ( margin meaning.