[ECO 101] - Final Exam Guide - Everything you need to know! (53 pages long)
Document Summary
How much does it really cost? o. Economists compare if you do something to if you don"t do something. The surprising principle of comparative advantage o o. China today produces many products that americans buy in huge quantities. Law of comparative advantage- shows that even in this extreme cast, the two nations could still benefit by trading and that each could gain as a result. Trade is a win-win situation: one of the most fundamental ideas of economics is that both parties must expect to gain something in a voluntary exchange. o. Laws sometimes prohibit mutually beneficial exchanges between buyers and sellers. The importance of thinking at the margin: marginal analysis- is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Externalities- a shortcoming of the market cured by market methods: externalities- the affect parties external to the economic transaction that cause them.
