econ ch. 1 - -every economic issue involves at its most...

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1-every economic issue involves, at its most basic level individual choice - INDIVIDUAL CHOICE: is the decision by an individual of what to do, which necessarily involves a decision of what not to do - RESOURCES ARE SCARCE - resource: anything that can be used to produce something else - resources are scarce: the quantity available isn’t large enough to satisfy all productive uses - resources include land, labor, human capital, limited income, time OPPORTUNITY COST : the real cost of something is what you must give up to get it - in the end, all costs are opportunity costs HOW MUCH IS A DECISION AT THE MARGIN -some important decisions involve an ‘either-or” choice - others involved “how much” choices: i.e. if you are taking both econ and chem this semester, you must decide how much time to spend studying for each - “how much” is a decision made at the margin - you make a TRADE OFF when you compare the costs with the benefits of doing something - decisions of this type - what to do with your net hour, what to do with your next dollar, etc – are MARGINAL DECISIONS. .. they involve making trade-offs at the margin: comparing the costs and the benefits of doing a little bit more of an activity versus doing a little bit less - the study of such decisions is known as MARGINAL ANALYSIS - marginal analysis plays a central role in economics because it is the key to deciding “how much” of an activity to do PEOPLE USUALLY EXPLOIT OPPORTUNITIES TO MAKE THEMSELVES BETTER OFF -it is a very good bet that people will exploit opportunities to make themselves better off. - furthermore, individuals will continue to exploit these opportunities until they have been fully
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This note was uploaded on 04/17/2008 for the course IBEC 201 taught by Professor Liu during the Winter '08 term at Ohio Northern University.

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econ ch. 1 - -every economic issue involves at its most...

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