INTRO TO MICRO

How individuals make choices?

The real cost = opportunity cost

"How much?" = decision at the margin

Resources are scarce

People take advantage to make themselves better off

Quantity limited to satisfy (petroleum, lumber...)

Resources = used to produce (land, labor, capital...)

Making trade-off at the margin = comparing costs&benefices of a bit more VS bit less

Study of it = marginal analysis

Incentive = anything that offers rewards to people who
change their behavior

How individual choices interact?

Resources should be used as efficiently as
possible to achieve society’s goals

Markets move -> equilibrium

Markets usually lead to efficiency

When markets don’t achieve efficiency,
government intervention help -> society’s welfare

Gains from trade

More goods and services than if they'll try self-sufficency

Market economy = providing & receiving

Increase out-put due to specialization

equilibrium = point where no individual
would be better off doing something different

each change = new equilibirum

Efficient economy = take all opportunity to make everyone better and no one worse

Market fail = externalities not taking into account

Some goods can not be efficient with markets (freeways)