BU111 Lecture Notes - Lecture 1: Opportunity Cost, Market Failure, Market Power
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BU111 Full Course Notes
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Opportunity cost: an opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made. Marginal cost: the change in total cost that comes from making or producing one additional item. Positive vs. normative: positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements do not have to be correct, but they must be able to be tested and proved or disproved. Normative economic statements are opinion based, so they cannot be proved or disproved. Positive question: a question that potentially has a right answer. Normative question: a question that could not have a right answer. Economics: the study of how society manages scarce resources. Market economy: an economy that allocates resources through the decentralized decisions of many firms and households.
