8-25-10

8-25-10 - Chapter 1 Notes Wednesday, August 25, 2010 9:39...

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Chapter 1 Notes Wednesday, August 25, 2010 9:39 AM 3 economic ideas: People are rational, People respond to incentives, optimal decisions are made on the margin Scarcity: the situation in which unlimited wants exceed the limited resources available to fulfill those wants Economics: The study of the choices peope make to attain their goals, given their scarce resources. 3 fundamental questions an economy must answer: What goods and services will be produced? How will the goods and services be produced? Who will receive the goods and services? Economic Model: A simplified version f reality used to analyze real world economic situations. Optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost (MB = MC) Marginal Analysis: Comparing MB and MC Trade-off: The idea that because of scarcity, producing more of one good or service means producing less of another good or service. Centrally Planned Economies Vs. Market Economies
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8-25-10 - Chapter 1 Notes Wednesday, August 25, 2010 9:39...

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