ECON-2110 Lecture Notes - Lecture 4: Historical Cost, Opportunity Cost, Marginal Cost
Document Summary
Essential concepts (cont. : opportunity cost (concept #2) *** opportunity cost (opportunity sacrificed) = marginal cost. Trade bill for bill --- both just paper! Opportunity to exchange bill for things we like would be lost. We value money because of what it represents. Because everything is scarce, life consists of tradeoffs. ** historical cost is irrelevant, only opportunity costs matter (september 2 continuing from previous lecture) *** remember to ignore the sunk costs *** Opportunity cost = marginal cost and vice versa no yes. If costs can"t be affected, they are sunk and are not relevant in the present, but they do affect the future decisions. September 9: gains from trade and comparative advantage, gains from trade. People trade b/c they expect to be made better off (marginal principle) Trade moves goods from low value to higher value. That difference in values = gains from trade: trade and specialization.
