Microeconomics Notes - MICROECONOMICS 8/31 SCARCITY There...

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MICROECONOMICS 8/31 SCARCITY : There aren’t enough resources to satisfy all of our wants. *Economics is about figuring out how we make decision/choices given that there is scarcity. 7 PRINCIPLES OF ECONOMICS: 1.) People face tradeoffs 2.) The cost of something is what you give up to get it (opportunity cost). 3.) Rational people think at the “Margin”. (Little more/little less) 4.) People respond to incentives. 5.) Trade can make “everyone” better off. 6.) Markets are usually a good way to organize economic activity. 7.) Governments can sometimes improve market outcomes. 9/2 MODELS : - Simplifications from the world that allow us understand the world. - Think about the assumptions made within the model.
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- “Cetesis Daribus”: all other things unchanged. *Production Possibilities Frontier : -A graphical representation of the alternative combination of goods an economy can produce. (What can I make?) *Opportunity Cost : -The value of the next best alternative that is foregone in making a choice. College : Tution: $9,000 Room and Board: $8,400 =$17,400 $10 per hour $15,000 in foregone wages during the academic year $9,000 + $15,000= $24,000 - The slope tells us our opportunity cost!! - Law of increasing opportunity cost: as we produce more of a good, the opportunity cost goes up. - Specialized resources, some inputs that are better at privies one good than another. - 2 things that will shift that production possibility.
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9/7 TRADE : - Pick 2 coconuts per hour - Or catch 6 fish per hour - 8 hours to work (fish/pick) o 16 coconuts, 0 fish o 48 fish/ 0 coconuts o 24 fish/ 8 coconuts - Gilligan: 8 hours o Pick 4 coconuts per hour: 32 coconuts o Catch 8 fish per hour: 64 fish
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