Chapter 1 Notes

Chapter 1 Notes - Chapter 1 Economics: Models and...

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1 1 Chapter 1 Economics: Models and Foundations 2 Introductory Concepts Scarcity means: Resources are scarce, but human wants are: Scare resources and unlimited wants imply the need to make: Economics The study of the choices people make to attain their goals, given their scarce resources.
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2 Most economic events occur “markets”. Markets involve: Three Key Economic Principles People are rational . People respond to economic incentives. Optimal decisions are made at the margin. 3 4 The Economic Problem That Every Society Must Solve Resources are limited and desires are unlimited, so society faces trade-offs . How to evaluate trade-offs? Compare the benefits of an activity to the opportunity cost of the activity Opportunity cost The highest-valued alternative that must be given up to engage in an activity. Examples : What is the opportunity cost of going to an Aggie basketball game?
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3 What is the opportunity cost of coming to class today? What is the opportunity cost of one semester of college?
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This note was uploaded on 11/15/2010 for the course ECON 203 taught by Professor Nelson during the Fall '08 term at Texas A&M.

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Chapter 1 Notes - Chapter 1 Economics: Models and...

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