KWChapter1 - CHAPTER 1 First Principles What you will learn...

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CHAPTER 1 First Principles
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What you will learn in this chapter: Trade Gains from trade Specialization Equilibrium Efficiency and equity A set of principles for understanding the economics of  how individuals make choices: Scarcity Opportunity cost Trade-offs Marginal analysis A set of principles for understanding the economics of  how individual choices interact:
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Individual Choice Individual choice  is the decision by an individual of  what to do, which necessarily involves a decision of  what not to do. Basic principles behind the individual choices:  1. Resources are scarce.  2. The real cost of something is what you must give up  to get it.  3. “How much?” is a decision at the margin.  4. People usually take advantage of opportunities to  make themselves better off.
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Resources are scarce.  resource  is anything that can be used to produce  something else.  Ex.: Land, labor, capital Resources are  scarce —the quantity available isn’t  large enough to satisfy all productive uses.  Ex.: Petroleum, lumber, intelligence
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The real cost of something is what you  must give up to get it.  The real cost of an item is its  opportunity cost : what  you must give up in order to get it. Opportunity cost is crucial to understanding individual  choice: Ex.: The cost of attending the economics class is  what you must give up to be in the classroom during  the lecture.
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This note was uploaded on 04/15/2008 for the course ECON 2106 taught by Professor Banzhaf during the Spring '06 term at Georgia State.

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KWChapter1 - CHAPTER 1 First Principles What you will learn...

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