ECON 1B03 Study Guide - Midterm Guide: Invisible Hand, Opportunity Cost, Comparative Advantage

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: All

Document Summary

Introduction to economics: production possibilities, ppf and opportunity costs, comparative advantage, market demand, market supply, market equilibrium. Study of how society allocates scarce resources to satisfy society"s unlimited wants. Resources are scarce/limited so we need to come up with a way to allocate these resources to keep everyone happy. Looks at households, firms, individuals and how do they make decisions. How does everyone interact in specific markets. Firms and households (individuals, not government) get to make all the decisions. What and how much they will produce. Use all information you can get our hands on to make the best decisions. We assume when people make decisions they are acting rationally. Everyone knows everything there are no questions or uncertainties. There is someone who knows something you don"t know. A chef knows that the salmon is fresh that day but the customers don"t, they can only assume this. Anything that can be used to make something else.