EconH200L1

EconH200L1 - Principle #1: People Face Tradeoffs To get...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Principle #1: People Face Tradeoffs To get something you want, you have to give up something else you want. Scarce resources. Think of allocating your time or money . Societies face a tradeoff between more consumer goods (low taxes) and more public goods (defense, social programs). Since governments can borrow, there is a tradeoff between consumption for current and future generations. There is sometimes a tradeoff between the environment and jobs. equity : fair treatment efficiency : producing the biggest possible "pie". tradeoff between the two : will you sacrifice to become a doctor if your wealth is taxed?
Background image of page 1

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

View Full DocumentRight Arrow Icon
Principle #2: The cost of something is what you give up to get it. example: College education. The benefits are the job opportunities and personal satisfaction, but there are costs besides “out of pocket” costs like tuition and books. Make sure you count the 4 years' lost earnings. (Lebron James made a good choice.) Just count the room and board costs over and above what you would have paid if you didn't go to college. opportunity cost--what you give up in order to obtain the item in question.
Background image of page 2
Principle #3: Rational people think at the margin. A marginal change is a small adjustment to an existing plan of action. [a deriv*****] example: Suppose you are an airline executive deciding whether to sell a standby ticket for $300. The 200 seat plane is nearly, but not quite, sold out, and the total costs for the flight are $100,000, or an average cost of $500. Should you sell a standby seat "below cost"? Yes, since the marginal benefit, $300, exceeds
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/17/2008 for the course H 200 taught by Professor Fleisher during the Fall '08 term at Ohio State.

Page1 / 12

EconH200L1 - Principle #1: People Face Tradeoffs To get...

This preview shows document pages 1 - 4. Sign up to view the full document.

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