ECO105Y1 Chapter Notes - Chapter ONE: Absolute Advantage, Comparative Advantage, Opportunity Cost

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coralcricket216

31 Mar 2015

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Chapter 1: you have to give up something to get something else. B/c you can never satisfy all of your wants, making the met out of your life requires smart choices about what to go after, and what to give up. Economics: how individuals, businesses, and governments make the best possible choices to get what they want, and how those curious choices interact in markets. Scarcity: the problem that arises b/c we all have limited money, time, and energy. Opportunity cost is the single most important concept both in economics and for making smart choices in life: b/c of scarcity, every choice involves a trade-off, true cost of any choice is the opportunity cost. Opportunity cost: cost of best alternative give up: for a smart choice, the value of what you get must be greater than value of what you give up.

Related Questions

One often-used definition of the term opportunity cost is that it is something that is given up when a choice is made. An example would be the money from working full-time given up by going to school. I suggest using the definition that opportunity cost is in terms of the foregone benefits of the next best alternative that could have been chosen. If the choice is for going to school instead of working full-time, then the opportunity cost would be all the benefits you would enjoy from working full-time in addition to the income you would earn. Using examples from your experiences and what you know, in what manners does the suggested change in definitions offer advantages in evaluating potential outcomes of choices either you or society have to make? How does this second opportunity cost definition help you make better decisions?

What would be the best definition of economics?

A. Economics is something we study in History to learn about jobs.

B. Economics is about money. It is also a study about employment, decision- making and choices, and how scarcity and competition lead people to behave.

C. Economics is the way people make money and how they find their hobbies.

D. Economics is how people choose a job and where they choose to live.

blacksardine103

Discuss why we need to be concerned with the value of something we did not choose, as opposed to simply stating the value of the item we want to pick.

Example:

One of the key concepts in economics is an opportunity cost, which simply put, is the value we place on our second choice. That is when presented with a number of choices, describe the value of the one we pick in terms of the value we place on our next best choice. This definition may seem odd to you, given that we don't pick our second choice. For example, if I decide to go out for pizza, that means I did not go out for a hamburger (which would have been my second choice). In business, an opportunity cost is a lost opportunity when we make a choice; managers need to ensure they are making the choice that yields the highest return in order to maximize profit.

browncheetah997

ECO105Y1 Chapter Notes - Chapter ONE: Absolute Advantage, Comparative Advantage, Opportunity Cost

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