Microeconomics Chapter 1 Principles Overview

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Resources are scarce. ,[object Object],[object Object],[object Object],[object Object]

The real cost of something is what you must give up to get it. ,[object Object],[object Object],[object Object],[object Object],[object Object]

Opportunity Cost ,[object Object],[object Object],[object Object],I could’ve had a V-8!

“How much?” is a decision at the margin. ,[object Object],[object Object],[object Object],[object Object]

Marginal Analysis ,[object Object],[object Object],[object Object]

People usually take advantage of opportunities to make themselves better off. ,[object Object],[object Object],[object Object],[object Object],[object Object]

Interaction: How Economies Work ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Market Economy ,[object Object],[object Object],[object Object],[object Object],[object Object]

There are gains from trade. ,[object Object],[object Object],[object Object]

This increase in output is due to specialization : Each person specializes in the task that he or she is good at performing. The economy, as a whole, can produce more when each person specializes in a task and trades with others. Adam Smith (The Wealth of Nations) – pin manufacturing

Markets move toward equilibrium. ,[object Object],[object Object],[object Object]

Markets create efficiency on their own ,[object Object],[object Object],[object Object]

Resources should be used as efficiently as possible to achieve society’s goals. ,[object Object],[object Object],[object Object]

Efficiency vs. Equity ,[object Object],[object Object],[object Object],[object Object],[object Object]

Markets usually lead to efficiency. ,[object Object],[object Object],[object Object],[object Object],[object Object]

When markets don’t achieve efficiency, government intervention can improve society’s welfare. ,[object Object],[object Object],[object Object],[object Object],[object Object]

Microeconomics Chapter 1 Principles Overview

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