econ notes - People make choices as they try to attain...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
People make choices as they try to attain their goals We live in a world of scarcity (ex: time) Scarcity - situation in which unlimited wants exceed the limited resources available to fulfill those wants Economics - the study of choices people make to attain their goals, given their scarce resources Three Economic Ideas : people are rational; people respond to incentives; optimal decisions are made at the margin Three Fundamental Questions: What goods and services will be produced? How will the goods and services be produced? Who will receive the goods and services? Economic model - simplified versions of reality used to analyze real-world economic situations Building a Foundation: Economics and Individual Decisions Market- a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade o Three Impt Ideas: People are rational- assumed; explains most of the choices people make People respond to economic incentives- humans act from a variety of motives; including religious beliefs, envy and compassion Optimal decisions are made at the margin- “all or nothing decisions” (open a restaurant or not? Graduate school or a job?) Marginal- extra or additional benefit or cost of a decision Marginal benefit-(MB) watching TV as additional enjoyment Marginal cost – (MC) lower grade having studied less
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Economists reason that the optimal decision is to continue any activity up to the point where MB=MC Marginal Analysis- analysis that involves comparing MB and MC The Economic Problem That Every Society Must Solve
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/16/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Spring '08 term at Pennsylvania State University, University Park.

Page1 / 6

econ notes - People make choices as they try to attain...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online