ECON 1B03 Chapter Notes - Chapter 1: Externality, Market Failure, Opportunity Cost
Shanghaibalcony1234 and 37744 others unlocked
46
ECON 1B03 Full Course Notes
Verified Note
46 documents
Document Summary
Economy word comes from greek word for one who manages a household : scarcity refers to the limited nature of society"s resources in comparison to people"s. How people make decisions: decision making is at the heart of economics. 4 principles of individual decision making: people face trade-offs, nothing is free to get one thing that we like, we must give up another thing that we like, all decisions involve trade-offs (opportunity cost): efficiency vs. equity. Efficiency: getting the most out of scarce resources (the size of the pie) Equity: distributing prosperity fairly among society"s members (how pie is distributed: trade-off: to increase equity, can redistribute income from the well-off to the poor. An opportunity cost can only arise when we take an action. If we do one thing or buy one thing, we can"t do/buy something else at the same time or with the same money.