Class notes
Eco 201 - Chapter 1 notes
- Course
- ECO 201
- Institution
- Miami University Of Ohio
This is a comprehensive and detailed note that Covers proper intro to the course principles of microeconomics. U'll need it!!
[Show more]
Content preview
Economics is a social science that studies how individuals and societies allocatelimited resources to meet seemingly unlimited wants/demands.
Social science – uses scientific method to understand human behavior or
decision making
Allocate – to put a resource to a specific use/purpose
Fundamental problem is that wants/demands are unlimited, but the resources
available are limited.
Scarcity – all resources are necessarily limited in nature
Resources can be both tangible and intangible (i.e. time)
-Forced to make decisions b/c of the fundamental problem
Principle 1: People (and societies) face tradeoffs
Tradeoff – give up some of one thing for more of another
-People constantly face tradeoffs
Why? Scarcity
Principle 2: Cost of something is everything you give up to get it
Accounting cost – amount of money you give up to get something
Opportunity cost (OC) of an action – value that you place on your best
alternative to that action
Economic cost = accounting cost + OC
Principle 3: Rational people make decisions at the margin
A rational person acts in an attempt to make themselves as well off as possible given
the information available to them
Margin – small or incremental changes in a plan of action
Ex: sunk cost fallacy – letting sunk costs effect our decisions -> not rational
Sunk cost of an action – cost that has already been incurred and cannot be
recovered through the decision you make
Like spending money on something that won’t work but follow through
anyway b/c already spent
Principle 4: People respond to incentives (true but redundant)
Incentive – something that induces someone to act
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller anyiamgeorge19. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.39. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
83637 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now