23115 Lecture Notes - Lecture 1: Opportunity Cost, Seat Belt, Marginal Cost
Document Summary
The word economy (cid:272)o(cid:373)es f(cid:396)o(cid:373) the g(cid:396)eek (cid:449)o(cid:396)d fo(cid:396) (cid:858)o(cid:374)e (cid:449)ho (cid:373)a(cid:374)ages a household(cid:859). An economy is just a group of people interacting with one another as they go about their lives. Because the behavior of an economy reflects the behavior of the individuals who make up the economy. For example, the household must allocate its scarce resources (time, dessert, petrol) among its various members, taking i(cid:374)to a(cid:272)(cid:272)ou(cid:374)t ea(cid:272)h (cid:373)e(cid:373)(cid:271)e(cid:396)(cid:859)s a(cid:271)ilities, effo(cid:396)ts a(cid:374)d desi(cid:396)es. Economics is the study of how society manages its scarce resources. Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have. Making decisions requires trading off one goal against another. The classic trade-off is between (cid:858)gu(cid:374)s a(cid:374)d (cid:271)utte(cid:396)(cid:859). The (cid:373)o(cid:396)e (cid:449)e spe(cid:374)d o(cid:374) defe(cid:374)(cid:272)e to p(cid:396)ote(cid:272)t ou(cid:396) sho(cid:396)es f(cid:396)o(cid:373) fo(cid:396)eig(cid:374) aggressors (guns), the less we can spend on personal goods to raise our standard of living at home (butter).
