Notes - Chapter 1 - Marginal = Additional Chapter 1 :...

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Marginal = Additional Chapter 1 : Thinking Like an Economist I. Introduction 1. Economics is not a collection of settled facts 2. The only reliable prediction that can be made about an economy is that there will always be unpredictable changes . 3. What is economics? 1. A way of thinking about the world 2. Set of simple (yet widely applicaple) principals II. Scarcity 1. Scarcity Principals 1. Boundless wants cannot be satisfied with limited resources 2. Therefore, having more of one thing usually means have less of another 3. Because of scarcity we must make choices III. Economics – Study of how people make choices under conditions of scarcity and of the results of those choices for society. 1. Economics is a study of decision making 2. Social or behavioral “science” 3. “Dismal” Science – No set facts 4. Cost/Benefit Principle 1. An individual will take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs. 2. C(x) = the costs of doing x 3. B(x) = the benefits of doing x 4. If B(x) > C(x), do x; otherwise don't. 1. If you buy it, it is worth at least as much as you paid for it. 5. Applying the Cost-Benefit Principles 1. Cost-Benefit analysis is the mechanism by which people make decisions according to economists. 2.
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This note was uploaded on 06/10/2008 for the course ECON 103 taught by Professor Lucchesii during the Spring '08 term at Ohio University- Athens.

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Notes - Chapter 1 - Marginal = Additional Chapter 1 :...

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