ECO 1104 Chapter Notes - Chapter 1-3: Microeconomics, Opportunity Cost, Market Economy
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13 Sep 2013
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Economics: the study of how human beings coordinate their wants and desires, given the decision- making mechanisms, social customs, and political realities of society. Our society has unlimited wants and desires. Opportunity cost: in economics, it is the cost of the choice we make in a decision making process over another choice. What must be given up in order to get something else. They are often hidden, and all must be taken into consideration before making a decision. Economic theory is divided in two broad categories microeconomics and macroeconomics. Microeconomic theory: considers economic reasoning and behavior of individuals and firms. Macroeconomics: studies the economy as whole and broad economic aggregates such as inflation, unemployment, business cycles, and economic growth. Three central coordination problems any economy must solve are: what to produce, how to produce it, for whom to produce it. If the marginal benefits of doing something exceed the marginal costs, do it.
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