EconNotes1 - ECONOMICS AND INDIVIDUAL DECISIONS 10:53:00 PM...

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

View Full Document Right Arrow Icon
ECONOMICS AND INDIVIDUAL DECISIONS 18/03/2008 21:53:00 Economics:      The study of the choices people make to attain their goals, given  their scarce resources.  Scarcity:      The situation in which unlimited wants exceed the limited resources  available to fulfill those wants. Economic Models:      Simplified versions of reality used to analyze real-world  economic situations. Market:      A group of buyers and sellers of a good or service and the institution or  arrangement by which they come together to trade. People are Rational:     Economics assume that consumers and firms use all available information as  they act to achieve their goals. Rational individuals weigh the benefits and costs of each action. They then choose an action if the benefits outweigh the costs. People Respond to Economic Incentives:     Humans act from a variety of motives, including religious belief, envy, and  compassion. They respond to economic incentives – Their decisions are based on what  will allow them to gain the most profit, or lose the least amount of money. Optimal Decisions are Made at the Margin:     MARGINAL: The extra or additional benefit or cost of a decision. MARGINAL BENEFIT: The joy you gain from any activity. MARGINAL COST: The loss of doing any activity. Economists reason that the optimal decision is to continue any activity up to  the point where the marginal benefit equals the marginal cost: MB = MC.
Background image of page 1

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

View Full DocumentRight Arrow Icon
MARGINAL ANALYSIS: Analysis that involves comparing marginal benefits  and marginal costs.
Background image of page 2
18/03/2008 21:53:00 What Goods and Services Will be Produced?     Individuals aid in deciding what will be produced. When individuals choose one thing over another, it helps companies decide 
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 03/18/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Spring '08 term at Penn State.

Page1 / 8

EconNotes1 - ECONOMICS AND INDIVIDUAL DECISIONS 10:53:00 PM...

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