ECON 1 Lecture Notes - Lecture 1: Invisible Hand, Market Economy, Opportunity Cost
Document Summary
Incentives something that induces a person to act (reward/punish: rational people respond to incentives, respond to incentives in predictable ways, self-interest = important incentive, ex. Ralph nader"s unsafe at any speed ; seatbelts: markets are a good way to organize economic activity. Market- a group of buyers and sellers (need not be in a single location) Ex: going to a party the night before a midterm: having more money: can buy more, but less free time. Efficiency when society gets the most from scarce resources. Equality when prosperity is divided uniformly among society"s members. To achieve greater equality, we could redistribute income (money) from wealthy to the poor but it reduces the incentive to work & produce (shrinks the size of the economic pie) Opportunity cost whatever must be given up to obtain something. ** making decisions requires comparing the costs & benefits of alternative choices: rational people think at the margin.
