ch 1 Class notes

ch 1 Class notes - Class notes Thursday 12:30 PM Allocating...

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Efficiency - people who want to pay the most will get the item Equity- people start with the same amount of points and bid with this for items Auctions Does it provide….. Allocation of resources (value based on what they are willing to pay, people who value them the most will pay the most) Allocating resources: peoples tastes in those resources Scarcity: the limited nature of society's resources How people decide what to buy, how much to work, save, and spend How firms decide how much to produce, how many workers to hire How society decides how to divide its resources between national defense, consumer goods, protecting the environment and other needs Economics: the study of how society manages its scarce resources Society faces an important tradeoff (efficiency vs. equality [equity]) a. Efficiency: when society gets the most from its scarce resources b. Equality: when prosperity is distributes uniformly among society's members c. Tradeoff: to achieve greater equality, could redistribute income from wealth to poor. But this reduces incentive to work and produce, shrinks the size of the economic "pie". d. People face tradeoffs 1) Making decisions requires comparing the costs and benefits of alternative choices a. The opportunity cost of any item is whatever must be given up to obtain it b. It is relevant cost for decision making c. "there ain't no such thing as a free lunch" d.
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