Outline- Eco Chapter 1

Outline- Eco Chapter 1 - Chapter 1 Economics: Foundations...

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Chapter 1 Economics: Foundations and Models Economics and Individual Decisions o Scarcity is the situation in which unlimited wants exceed the limited resources available to fulfill those wants. People must make choices as they try to attain their goals the choices reflect the trade-offs people face because we live in a world of scarcity. o Economics is the study of the choices people (consumers, business managers, government officials) make to attain their goals, given their scarce resources. o An economic model is a simplified version of reality used to analyze real-world economic situations. o A market is a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. By analyzing how people interact and make choices in markets, we discover three important ideas: 1. People are rational. Individuals consider the opportunity cost . The opportunity cost is not the cost of the item, rather, it is what the individual could have done with the money instead. Opportunity costs are unique to the individual. Example: You bought a new car, therefore, you cannot afford to go on vacation. Rational individuals weigh the benefits and costs of each
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This note was uploaded on 02/23/2012 for the course MGT 101 taught by Professor Staff during the Fall '10 term at Texas State.

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Outline- Eco Chapter 1 - Chapter 1 Economics: Foundations...

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