ECON 1050 Chapter Notes - Chapter 1: Marginal Utility, Marginal Cost, Opportunity Cost
Chapter 1 9/12/2012 1:24:00 PM
Scarcity – our inability to get everythin we want (wanting more than what
we can get).
Incentive – a reward that encourages an action or a penalty that discourages
Economics – social science study, that studies the choices individuals,
businesses, and societies make to cope with scarcity & incentives that
influence the choice(s)
Microeconomics – study that focuses on individual elements of an economy
such as consumers, businesses, labor and government and their role in the
determination of prices for goods and services. (looks at the way individual
markets affect the prices and allocation of resources)
Macroeconomics – the study of total economic activity, not individual
markets, gives an overview of the total economy.
Goods & Servies.
Factors of Productin
- Land: natural resources we use to produces goods and servies [rent]
- Labor: time and effort people devote to producing goods and services
Human Capital: knowledge and skills people attain through education, job
training, and work experience
- Capital: factories, equipment tools, etc used in the production process.
(human-made resources) [interest]
- Entrepreneurship: management skills (of other factors) [profit]
Self-interest: a choice to benefit oneself over others
Social-interest: a choice beneficial to society as a whole
Trade-off: an exchange, giving up one thing to get another.
Rational Choice: compares costs and benefits, leading to the choice with
benefits outweighing the costs
Benefit: something that brings gain or please in one’s preferences
Preference: what an individual likes and dislikes based on personal feeling
Opportunity Cost: the highest valued alternative that must be given up to
Marginal benefit: a benefit that arises from an increase in an activity
Marginal cost: the opportunity cost from an increase in an activity
Economic Model: a description of some aspects of the economic world that
includes only those features that are needed for the purpose at hand
Chapter 2 9/12/2012 1:24:00 PM
Production Possibility Frontier – the boundary between those combinations of
goods and services that can be produced and those that cannot
Production efficiency – producing goods and services at the lowest possible