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Chapter 1 - CHAPTER 1 First Principles 1 Individual Choice...

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CHAPTER 1 – First Principles 1. Individual Choice Individual choice is the decision by an individual of what to do, which necessarily involves a decision of what not to do. Why must we choose? 2. How Individuals Make Choices Basic principles behind the individual choices: --Resources are scarce. A resource is anything that can be used to produce something else. Scarce – The quantity available is not large enough to satisfy all productive uses. -- Opportunity cost The real cost of something is what you must give up to get it It is all about what you have to forgo to obtain your choice. --“How much?” is a decision at the margin. Trade-offs – comparing the costs and benefits of doing something Marginal decisions and marginal analysis Marginal decisions – deciding whether to do a bit more or a bit less. Marginal Analysis – the study of such a decision. --People usually take advantage of opportunities to make themselves better off.
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