ECN 104 Lecture Notes - Lecture 16: Economic Equilibrium, Demand Curve, Opportunity Cost
27 Nov 2017
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Principle 1: people face tradeoffs (efficiently and equity) Principle 2: the cost of something is what you give up to get it (opportunity cost) Principle 3: rational people think at the margin (rationale people & marginal change) Principle 4: people respond to incentives (people will react) Principle 5: trade can make everyone better off. Principle 6: markets are usually a good way to organize economic activity (market economy) Principle 7: government can sometimes improve market outcome (market failure, externality & market power) Principle 8: a country"s standard of living depends on its ability to produce goods & services (productivity) Circular flow diagram & factors of production. Production possibilities frontier (ppf) shows the combinations of all goods an economy can produce. Feasible productions. efficient (everything on ppf) and non-efficient productions (not on. As we keep increasing the quantity of a good, the opportunity cost of that good increases.
