Get 1 week of unlimited access
Textbook Notes (238,254)
US (74,545)
U of M (2,121)
ECON (174)
Chapter 1

ECON 101 Chapter 1: Chapter One Notes (1)Premium

2 pages29 viewsWinter 2019

Department
Economics
Course Code
ECON 101
Professor
Adam Stevenson
Chapter
1

This preview shows half of the first page. to view the full 2 pages of the document.
ECON 101- Chapter One
Every economic issues involved individual choice.
Principles Involving Individual Choice
Principle 1: Choices are necessary because resources are scarce
Time and money limit what people can do or buy
Resource is anything that can be used to produce something else
Scarce when there’s not enough to satisfy all ways a society wants to use it
Principle 2: The true cost of something is its opportunity cost
Giving up something to do another thing is opportunity cost
Doesn’t always match up to monetary cost
While college is expensive, the opportunity cost is too
Principle 3: “How much” is a decision at the margin
Trade off is a comparison of costs and benefits
Study of these marginal decisions is marginal analysis
Principle 4: People usually respond to incentives, exploiting opportunities to make
themselves better off
Incentive is a way to make themselves better off
Economists skeptical of any attempt to change behavior that doesn’t change
incentives
To understand market, must understand how one’s choices impact another’s
Principle 5: There are gains from trade
Specialization is important
Principle 6: Markets move towards equilibrium
When a new cash register opens up, people rush over, but soon when it is as full
as the other lines, it will al even out
Principle 7: Resources should be used efficiently to achieve society’s goals
Economy efficient if it takes all opportunities to make some people better off
without making others worse off
Producing maximum gains from trade given resources available
People care about equity, there is a tradeoff between equity and efficiency
Principle 8: Markets usually lead to efficiency
Invisible hand ensures efficiency
Principle 9: When markets don’t achieve efficiency, government intervention can
improve society’s welfare
Individual benefits, such as pollution, can contribute to overall problems
What government policies are appropriate?
Principle 10: One person’s spending is another’s income
You're Reading a Preview

Unlock to view full version

Subscribers Only

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.