ECO100Y1 Chapter Notes - Chapter 1-2: Marginal Cost, Marginal Utility, Invisible Hand
Document Summary
Households allocate its scarce resources among its various members; society allocate people/lands/machines to various jobs. Economics: the study of how society manages its scarce resources / rational people make decisions. E. g. guns and butter : more national defense, less consumer goods. E. g. clean environment vs. higher level of income. E. g. efficiency vs. equity (equal slices of pie becomes smaller) The cost of something is what you give up to get it. Opportunity cost: whatever must be given up to obtain some item. Rational people: who systematically / purposefully do the best to achieve objectives. Marginal changes: small incremental adjustments to a plan of action. Marginal cost (p > mc means profit) vs. marginal benefit (water vs. diamond) Rational decision: marginal benefit > marginal cost. Incentive: something than induces a person to act (e. g. punishment/awards) E. g. price of apple rises: people buy more pears; more apple workers.
