ECON 1B03 Study Guide - Midterm Guide: Midpoint Method, Normal Good, Perfect Competition

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

Document Summary

Economics: the study of how society manages its scarce resources. But this reduces incentive to work and reproduce, shrinks the size of economic pie (this is another example of a tradeoff) Principle #5: trade can make everyone better off: rather than being self-sufficient, people can specialize in producing one good or service and exchange it for other goods, countries also benefit from trade and specialization. Get a better price abroad for goods they reproduce. Principle #3: rational people think at the margin. Buy other goods more cheaply from abroad than could be produced at home. Principle #6: markets are usually a good way to organize economic activity: market: a group of buyers and sellers (need not to be a single location, organize economic activity means determining: The interaction of buyers and sellers determines prices. Each price reflects the good"s value to buyers and the cost of producing the good.