Chapter 2 - Notes

Chapter 2 - Notes - Chapter 2 : Economics Notes 5 Key...

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Chapter 2 : Economics Notes 5 Key principles of Economics: 1. Principle of Opportunity Cost the opportunity cost of something is what you sacrificed to get A. The principle of opportunity costs incorporates the notion of scarcity: No matter what we do, there is always a trade-off. We must trade off one thing for another because resources are limited and can be used in different ways. By acquiring something, we use up resources that could have been used to acquire something else. The notion of opportunity cost allows us to measure this trade-off. 2. The marginal principle increased the level of an activity if it’s marginal benefit exceeds its marginal cost; reduce the level of an activity if it’s marginal cost exceeds its marginal benefit. If possible, pick the level at which the activity’s marginal benefit equals its marginal cost. A. The marginal principle provides a simple decision-making rule that helps individuals and organizations make decisions. Economists think in Marginal terms, considering how a one-unit change in one variable affects the value of another variable in people’s decisions. When we say marginal, we’re looking at the effect of only a small, or an incremental, change. 3.
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This note was uploaded on 04/09/2008 for the course EC 202 taught by Professor Online during the Spring '07 term at University of Oregon.

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Chapter 2 - Notes - Chapter 2 : Economics Notes 5 Key...

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