Textbook Notes (363,232)
Canada (158,276)
Economics (293)
ECON 105 (113)
Chapter 1

Chapter 1.docx

3 Pages
Unlock Document

Simon Fraser University
ECON 105
Brian Krauth

Econ 105 – Chapter 1 economy comes from the Greek work for “one who manages a household”  Def: the study of how society manages its scarce resources  A group of people interacting with one another as they go about their lives Opportunity cost: the cost something is what you give up to get it (also known as opportunity cost) Costs of being in this class: money, time (lecture, assignments, waiting in line at the bookstore), not being able to do other things, energy, etc.pretty much the next best thing we could do The 4 Principles of Decision Making (1-4) #1 – “People Face Tradeoffs”  To get one thing that we like, we usually have to give up another thing that we like  Efficiency vs. Equity: The problem with this method is when there is more equity, efficiency is dropped. Pie example: “when government tries to cut the economic pie into more equal slices, the pie gets smaller” #2 – “The Cost of Something Is What You Give up to Get It”  Decision makers should be aware of the opportunity costs that accompany each possible action #3 – “Rational People Thank at the Margin”  The willingness of a person spending a lot of money on a diamond vs. a cup of water is based on the marginal benefit that an extra unit of the good will yield. (diamonds are rare and water is abundant)  A rational decision maker takes an action if and only if marginal benefit of the action is exceeds the marginal cost  Thinking about little bits. Ex) is it worth staying in econ class for another minute. #4 – “People Respond to Incentives”  People’s actions are driven by incentives. Ex) Price apple goes up -> people eat pears -> farmers grow more apples  Economists think people are evil and always want what is best for them. Ex) too many doctors are using the sea section delivery because they make more money How people interact (5-7) #5 – “Trade Can Make Everyone Better Off”  Trading between countries is mutually beneficial. Ex) Canada & US producing same goods isn’t competition, but instead mutual aid  Trade allows each person to specialize in the activities he or she does best. Ex) A good farmer can trade its crops for clothes since he is not good at sewing  Trade allows countries to specialize in what they do best and to enjoy a greater variety of goods and services #6 – “Markets Are Usually a Good Way to Organize Economic Activity”  Households and firms interacting in markets act as if they are guided by an “invisible
More Less

Related notes for ECON 105

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.