Economics Notes - The Central Idea 12:55:00 PM People make...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
The Central Idea 08/01/2008 12:55:00 People make purposeful choices with scarce resources and interact with others  when they make these choices Economics  is the study of how people deal with scarcity Scarcity  is a situation in which people’s resources are limited  Implies that people must make a choice to give up one thing in favor of  another  Economic interactions  occur whenever people trade or exchange goods  with each other  Markets  are where economic interactions generally take place; it is an  arrangement by which buyers and sellers can interact and exchange goods  and service with each other (New York stock market, flea markets, etc.) SCARCITY AND CHOICE FOR INDIVIDUALS Consumer Decisions Opportunity cost : the value of the next-best forgone alternative that was not  chosen because something else was chosen o A budget constraint forces people to make choices o Example: The opportunity cost of going to an 8 A.M. class rather than  sleeping in is the sleep you lose when you get up early Gains from trade : improvements in income, production, or satisfaction owing  to the exchange of goods or services  Producer Decisions Specialization : a concentration of production effort on a single specific task  (people concentrating their production efforts on what they are good at)
Image of page 1

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

View Full Document Right Arrow Icon
Division of labor : the division of production into various parts in which  different groups of workers specialize Comparative advantage : a situation in which a person or group can produce  one good at a lower opportunity cost than another person or group (if that  person or group can produce that good with comparatively less time, effort, or  resources than another person or group can)  International Trade International trade : the exchange of goods and services between people or  firms in different nations People can better satisfy their preferences for goods or they can better utilize  their comparative advantage  Review All individuals face scarcity in one form or another. Scarcity forces people to  make choices. When a choice is made, there is also an opportunity cost of  not doing one thing because another thing has been chosen. People benefit from economic interactions with other people. Gains from trade occur because goods and services can be allocated in ways  that are more satisfactory to people.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern