Chapter 1 Outline - Chapter 1 People cannot get everything...

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Chapter 1 People cannot get everything they want due to scarcity Microeconomics: the study of how individuals and firms make themselves as well off as possible in a world of scarcity and the consequences of those individual decisions for markets and the entire economy Microeconomics are called price theory because of the emphasis and important role that prices play Consumers pick the mix of goods and services that make them as happy as possible given their limited wealth Firms decide which goods to produce, where to produce them a, how much to produce to maximize their profits and how to produce those levels of output at the lowest cost by using more or less of various inputs such as labor, capital, materials and energy Society faces three key tradeoffs: o Which goods and services to produce: If a society produces more cars, it must produce fewer of other goods and services, because there are only so many resources-workers, raw materials, capital and energy-available to
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This note was uploaded on 05/03/2009 for the course PAM 200 taught by Professor Unur during the Spring '08 term at Cornell University (Engineering School).

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Chapter 1 Outline - Chapter 1 People cannot get everything...

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