econ chapter 1

econ chapter 1 - Chapter 1 Introduction The Scarcity...

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Chapter 1 Chapter 1 Introduction Introduction The Scarcity Principle The Scarcity Principle • Economics: the study of choices and results under scarcity. • The Scarcity Principle: Unlimited wants and limited resources imply that having more of one good means having less of another. • Also called the No-Free-Lunch Principle.
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The Cost The Cost -Benefit Principle Benefit Principle • The Cost-Benefit Principle: Take an action if and only if the extra benefits are at least as great as the extra costs – Example: You are selling your 1996 Mustang. You have already spent $1000 on repairs. At the last minute, the transmission dies. You can pay $600 to have it repaired, or sell the car as is. Blue book value is $6500 if transmission works, $5700 if it doesn t. Should you have the transmission repaired? • Costs and benefits are not just money – Example: should I watch the movie? Cost Cost Benefit Example Benefit Example • Should you go to the other store to save $10 on a $25 computer game?
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This note was uploaded on 04/14/2009 for the course ECON ECON 1 taught by Professor Foster during the Spring '08 term at UCSD.

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econ chapter 1 - Chapter 1 Introduction The Scarcity...

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