ECO101H1 Chapter Notes - Chapter 1: Marginal Cost, Market Economy, Marginal Utility
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ECO101H1 Full Course Notes
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Economy: a system (typically very complex) where resources - such as land, labour and machines are allocated among competing uses. An economy based on free-market transactions is self-organizing. Self-interest is the foundation of economic order as our actions are motivated primarily by it and not by benevolence. Main characteristics of market economies: self-interest, incentives, market prices and quantities, institutions. Economics: study of the use of scarce resources to satisfy unlimited human wants. Society"s resources (factors of production): land: natural resources, labour: human resources (management skills, entrepreneurial capacity etc. , capital: capital resources (tools, machinery etc. ) What is produced is separated into two categories: goods (what is tangible, services (what is intangible) We live in a world of scarcity. Scarcity implies that choices must be made, and making choices implies the existence of costs. Opportunity cost: what is given up in making a choice (i. e. choosing pizza over a hotdog; the hotdog is the opportunity cost).
