1 Econ Class notes - From Class Economics notes Ch. 1-Ten...

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From Class Economics notes Ch. 1-Ten Principles of Economics I. How people make decisions a. Ex. Student allocating time i. Time is scarce b. Anything that can be quantified is considered scarce, all of it can be used i. Principle 1-People face trade offs 1. Efficiency and equity 2. Efficient-Getting rid of all of the resource 3. Equity-Dividing the resource based on some other reason, agreed upon 4. Government faces trade-off between efficiency and equity 5. Taxing discourages hard work, larger tax, less want to work, so you tax less, people work harder 6. Giving money to poor makes it more equitable but less efficient ii. Principle 2-the cost of something is what you have to give up to get it 1. Opportunity cost iii. Principle 3-Rational people think at the margin 1. Rational people think in Increments 2. If marginal benefit is greater than the marginal cost, keep going, once they equal or cost > benefit you stop iv. Principle 4- People respond to incentives 1. incentive-something that induces you to act
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This note was uploaded on 04/08/2008 for the course ECONOMICS 211 taught by Professor Petitfrere during the Fall '08 term at University of Miami.

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1 Econ Class notes - From Class Economics notes Ch. 1-Ten...

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