EC120 Lecture Notes - Lecture 2: Marginal Utility, Market Economy, Opportunity Cost
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EC120 Full Course Notes
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Document Summary
Economics: the study of how society manages its scarce resources. The (cid:373)a(cid:374)age(cid:373)e(cid:374)t of so(cid:272)iet(cid:455)"s resour(cid:272)es (cid:894)e. g. ppl, la(cid:374)d, (cid:271)uildi(cid:374)gs, (cid:373)a(cid:272)hi(cid:374)er(cid:455)(cid:895) is i(cid:373)porta(cid:374)t (cid:271)e(cid:272)ause resour(cid:272)es are scarce. Three groups: how people make decision (principles 1-4) individual, how people interact (principles 5-7) interaction between participants in the economy, how the economy as a whole works (principles 8-10) economy as a whole. Efficiency: the property of society getting the most it can from its scarce resources. Equity: the property of distributing economic prosperity fairly among the members of society. When government policies are designed, the two goals conflict. People are likely to make good decisions only if they understand the options available. Principle 2: the cost of something is what you give up to get up. Opportunity cost: whatever must be given up to obtain some item. When making any decision, decision makers should be aware of the opportunity cost that accompany each possible action. Principe 3: rational people think at the margin.
