econ 201 reading notes-1

econ 201 reading notes-1 - 20:25 Scarcity the limited...

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20:25 Scarcity- the limited nature of society’s resources Resources: human (labor), natural (land), capital (manufactured) Economics- the study of how society manages its scarce resources Most societies: resources are allocated not by an all-powerful dictator but through the  combined actions of millions of households and firms Four principles of individual decision making 1. People face trade-offs a. Efficiency vs equality a.i. Efficiency- the size of the economic pie a.ii. Equality- how the pie is divided into individual slices b. People are likely to make good decisions only if they understand the options  they have available c. Benefits vs costs 2. The Cost of Something is what you give up to get it a. Making decisions requires comparing the costs and benefits of alternative  courses of action b. Opportunity cost- whatever must be given up 3. Rational people think at the margin a. Rational People- people who systematically and purposefully do the best they  can to achieve their objectives b. Marginal changes- small incremental adjustments to a plan of action
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econ 201 reading notes-1 - 20:25 Scarcity the limited...

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