Textbook Notes (367,876)
United States (205,907)
Economics (47)
ECON 2106 (4)
Kakeu (2)
Chapter 1

Chapter 1 Reading.docx

5 Pages
Unlock Document

ECON 2106

Chapter 1 Reading 8/29/2012 4:29:00 PM Intro  Economics is all about individual choice  Economic interaction: how my choices affect your choices, and vice versa Principles of Individual Choice  Principle #1: Choices are necessary because resources are scarce o People must make choices because resources are scarce. o Time, money, land, labor, human capital, any other resource (anything that can be used to produce something else) o A resource is scarce when there’s not enough of the resource available to satisfy all the ways a society wants to use it. o Sum of individual choices is the choice of society as a whole.  Principle #2: The true cost of something is its opportunity cost o The opportunity cost (what you must give up in order to get an item you want) is its true cost. o All costs are opportunity costs o Not always monetary  Principle #3: “How Much” is a Decision at the Margin o “How much” decisions require making trade offs at the margin: comparing the costs and benefits of doing a little bit more of an activity versus doing a little bit less. o Trade-off: a comparison of costs and benefits o Marginal decisions: decisions about whether to do a bit more or a bit less of an activity o Marginal analysis: study of marginal decisions.  Key to “how much” of an activity to do  Principle #4: People usually respond to incentives, exploiting opportunities to make themselves better off. o Incentive: an opportunity to make themselves better off. o Individuals will exploit opportunities until they have been fully exhausted. Principles of the Interaction of Individual Choices  Principle #5: There are gains from trade o Key to a better standard of living is trade o Gains from trade: by dividing tasks and trading, two people can each get more of what hey want than they could get by being self-sufficient. o Specialization: division of tasks o Econom
More Less

Related notes for ECON 2106

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.