ECON2030 - ECON2030 CHAPTER 1 Economics is the study of...

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ECON2030 CHAPTER 1 Economics is the study of choices people (consumers, business managers, government officials) make to attain their goals given their scarce resources and analyzes what happens in markets People are rationally self-interested (make choices that make them happiest) People respond to incentives (money, free tickets) positive and negative Optimal decisions are made at the margin The same Incentive can be positive or negative for different people MARGINAL ANALYSIS Marginal can be thought of as a change in a variable (ex- economic entity, wants to maximize its net benefits) Net benefits- TOTAL BENEFITS – TOTAL COST B(x,y,z,…)= total benefits as a function of variables x,y,z and other variables C(x,y,z,…)= total cost as a function of variables x,y,z and other variables NB(x,y,z,…)= net benefits as a function of x,y,z and other variables NB(x,y,z,…)= B(x,y,z,…) - C(x,y,z,…) Marginal Benefit of X is additional benefit of one more unit of X, holding everything else constant Marginal Cost of X is additional cost of one more unit of X, holding everything else constant 3 basic questions all economic entities must answer - What will be produced - How is it going to be produced - Who gets the goods and services that are produced Extremes of Types of Economies 1) Market economy 2) Command economy MOST ECONOMIES ARE MIXED, U.S. is more market In a pure market economy every individual has well defined property rights. Each person gets to choose what they do with their resources In a command economy a central planning unit (dictator, government) decides the 3 basic
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ECON2030 - ECON2030 CHAPTER 1 Economics is the study of...

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