MGEA01H3 Chapter 1: First Principles

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA01H3
• Professor: H. Ho

Document Summary

Chapter 1: first principles problems 2, 11 & 15. E. g. , clean air and water have become scarce resources. Principle #2: the true cost of something is its opportunity cost: the opportunity cost of an item is what you must give up in order to get it, which is its true cost. (give up/gain) E. g. , your class schedule allows you take only one elective. However, there are two that you would like to take, i. e. , intro to computer graphics and history of jazz. Suppose there is a tuition fee for the former, but none for the latter. Graphics class, you give up the benefit from the history of. Jazz class, plus the benefit from spending the on other things. The study of such decisions is known as marginal analysis. Principle #4: people usually respond to incentives, exploiting. E. g. , a plan that calls on manufacturers to reduce pollution voluntarily probably won"t be effective because it hasn"t changed manufacturers" incentives.