Lecture Notes 9-8-09

Lecture Notes 9-8-09 - Lecture Notes September 8, 2009 What...

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Lecture Notes September 8, 2009 What kinds of questions does Economics address? What are principles of how people make decisions? What are the principles of how people interact? What are the principles of how the economy as a whole works? Principle 1: People Face Tradeoffs All decisions involve tradeoffs. Examples: “Going to a party the night before midterm. Leaves less time for studying.” Society faces an important tradeoff: Efficiency vs. equality Efficiency: Getting most from resources Equality : More uniform distribution of wealth Often : there is a tradeoff Principle #2: The Cost of Something is What You Give up to Get it Opportunity Cost: of an item is whatever must be given up to obtain it -Relevant to decision making Principle #3: Rational People Think at the Margin Rational people -Systematically and purposefully do the best they can to achieve their objectives -Make decisions by evaluating costs and benefits of marginal changes – incremental adjustments to an existing plan
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This note was uploaded on 01/25/2010 for the course ECONOMICS 220:102 taught by Professor Zhang during the Fall '09 term at Rutgers.

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Lecture Notes 9-8-09 - Lecture Notes September 8, 2009 What...

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