01:220:102- Midterm Exam Guide - Comprehensive Notes for the exam ( 16 pages long!)
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01:220:102 Full Course Notes
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Document Summary
Understanding the principles of how individuals make choices. Understanding how economies work through the interaction of individual choices. A set of principles for understanding economy wide interactions. The ability to choose is at the heart of economics. Resource: anything that can be used to produce something else. Scarce: when there is not enough of resource available to satisfy all the various ways a society wants to use. The true cost of something is its opportunity cost. Opportunity cost: the loss of potential gain when considering alternative costs. Opportunity cost = return of most lucrative option - return of chosen option. Accounting cost: a record of what happened to your total monetary asset. Opportunity cost: a record of resources you lost or saved. Trade off: comparison of the costs and the benefits of doing something. Incentive: anything that offers rewards to people who change their behavior.