BA 3340 Lecture Notes - Lecture 99: Disposable And Discretionary Income, Opportunity Cost, Price Ceiling
Document Summary
Society has unlimited wants but limited resources which leads to scarcity. Microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. Macroeconomics is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth. Three key economic ideas: people are rational, people respond to economic incentives, optimal decisions are made at the margin, marginal analysis: involves comparing marginal (additional/extra) benefits and marginal costs. Scarcity: the situation in which unlimited wants exceeds the limited resources available. Resources: inputs used to produce g+s, including natural resources, labour, capital and entrepreneurial ability. Trade-off: the idea that, because of scarcity, producing more of one g/s means producing less of another g/s: these trade offs force society to make choices. Productive efficiency: when a good or service is produced using the least amount of resources.
