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Week 1 (What is economics? (5 Foundations (Opportunity cost (Relates to…

- - - - Limited Resources
        
        Time
        
        Money
        
        Land
    - - Unlimited wants for limited resources
      - Not necessarily talking about shortage, rather if these would be free would there be enough to satisfy everyones wants
      - Not shortage
        
        Shortage = quantity supply < quantity demand
      - Efficient systems are able to manage these conditions.
  - - - Incentives Matter
        
        People respond to positive or negative incentives
        
        behavior adapts to incentive changes
        
        We know change in behavior will happen although we don't know in which way it will
        
        Unintended consequences
        
        An unplanned result (usually negative or unwanted) of an incentive
    - - Life is about trade offs
        
        Scarcity implies choice
        
        Choices between alternatives
        
        Every decision incurs a cost
        
        To have one thing you have to give up another thing.
        
        Trade offs and policy
        
        Governments face trade offs as well
    - - Relates to trade offs
        
        Every action in life has a trade off and an opportunity cost
        
        Value of trade off is represented by the opportunity cost
      - highest valued alternative that must be sacrificed to get something else
        
        Think what you would've done instead of coming to class. The first thing that comes in mind is the opportunity cost
      - Scarcity -> Choice -> Opportunity Cost
      - Theres always a cost as time has value.
      - The loss of potential gain from other alternatives when one alternative is chosen.
    - - The benefit of 1 more unit of something greater than the cost
      - Suppose you need 10 hours /week study to get a HD
        
        is it rational to study 11 hours a week?
        
        Not if you only want an hd, as the marginal benefit of getting an 84 rather than an 80 is lower than the marginal cost.
      - Marginal Benefit = willingness to pay
      - Marginal cost = actual cost
    - - Markets
        
        Bring buyers and sellers together to exchange goods and services
      - Trade
        
        The voluntary exchange of goods and services between two or more parties
        
        Trade will guarantee value to both parties
        
        Trade and comparative advantage
        
        our economy depends on specialization