ECON 203011

ECON 203011 - ECON2030 17:14 EconomicReasoning...

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ECON 2030 17:14 Economic Reasoning Opportunity Cost Margin- the limit, the edge Rationality- choosing the best perceive option Examples of Economic Reasoning Bibi the Tutor o Relevant Costs o Sunk Costs The $75 concert ticket is irrelevant because no matter what, the money  has already been spent o If the alternatives are both equal, than either choice is rational Stasia and the Smorgasbord Positive and normative economics o A positive statement is a statement that is descriptive and testable o Normative statements express a value judgment Buyer’s side of the market: Demand Demand 
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17:14 Chapter 1 Economics- the study of how human beings coordinate their wants and  desires, given the decision-making mechanisms, social customs, and political  realities of the society o Central Problems What, and how much, to produce How to produce it For whom to produce it o Scarcity- the goods available are too few to satisfy individuals’ desires Solved by coercion Limiting people’s wants and increasing the amount of work  individuals are willing to do to fulfill those wants Marginal Costs and Marginal Benefits o Marginal cost- the additional cost to you over and above the costs you  have already incurred Sunk costs- costs that have already been incurred and cannot be  recovered o Marginal Benefit- the additional benefit above what you’ve already derived Ex: marginal benefit of reading the chapter is the additional information  you get from it; you’ve already paid for the book (sunk) o Economic Decision Rule If the marginal benefit of doing something exceed the marginal costs,  do it. If the marginal costs of doing something exceed the marginal benefit,  don’t do it. Opportunity Cost- the benefit that you might have gained from choosing the  next best alternative o Ex: opportunity cost of having a child might be two boats, three cars, and  a bigger house Economic and Market Forces o Economic forces are the necessary reactions to scarcity
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17:14 o Market force- an economic force that is given relatively free reign by  society to work through the market Uses the “invisible hand”- a price mechanism, the rise and fall of prices  that guides our actions in a market Economic Insights o Theories are embodied in economic models- frameworks that place 
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ECON 203011 - ECON2030 17:14 EconomicReasoning...

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