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)