ECH-181 UNIT -1.docx - ECH-101 Dr Rupali Satsangi 1.1 INTRODUCTION Why study Economics 1 To learn way of thinking a Opportunity cost All decision

ECH-181 UNIT -1.docx - ECH-101 Dr Rupali Satsangi 1.1...

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ECH-101 Dr. Rupali Satsangi 1.1 INTRODUCTIONWhy study Economics?1.To learn way of thinking: a)Opportunity cost- All decision involves trade-offs. The best alternative that we forgone or give up, when we make a choice or a decision is called the opportunity cost.Opportunity cost arises because resources are scare. Scare simply means “limited” consider one of our most important resources-time.b)Marginalism and sunk cost- Another key concept used in analyzing choice is the notionof marginalism. In weighing the cost and benefits of a decision, it is important to weigh only the cost and benefit that arise from the decision.Example-10,000 copies of books are produced. The total cost of producing the copiesinclude the cost of author’s time in writing the book, the cost of editing, cost of makingplates for printing, cost of paper and ink. If the total cost 600;000 then average cost ofone copy would be $60, which simply: 600’000/10,000= 60If second printing is being debited. Another 10,000 copies be produced. in decidingwhether to proceed, the cost of writing, editing, making plates are irrelevant because theyhave already have incurred. They are Sunk Cost: cost that cannot be avoided regardlessof what is done in the future because they have already incurred.All that matters is the cost associated with the additional, or marginal, books to beprinted. Marginal cost in the cost of producing one more unit of output.c)Efficient market- No free lunch: Suppose you are ready to check out of a busy grocerystore on the day before a storm and seven checkout registers are open with several peoplein each line. Which line you should choose? It is usually the case that the waiting time inapproximately the same no matter which register you choose. It one line is much shorterthat others, people will quickly move into it until the lines are equalized again.
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Profit: In economics has a very precise meaning economist refer to “good deal” or riskfree ventures as profit opportunities efficient marketa market in which profitopportunities are eliminate almost instantaneously.This is express as “there are no such things as free lunch”.This is hot tip in stock marketProfit Opportunities.There are thousands of individual each day looking for not trip inthe market. If a particular tip about a stock is valid, there will be an immediate rush tobuy the stocks, which will quickly drives its price up.2.To understand society: Another reason for studying economics is to understand societybetter. Past and present economic decisions have an enormous influence on the characterof life in a society. The current state of physical environment, the lend of materialwellbeing and nature and number of jobs are all products of the economic system.
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