Essay about Economics and Marginal Benefit

September 14th: Lecture #1
• Econ lab: www.uwo.mylabsplus.com
• Economics? o “Common sense made difficult” o The study of choices that people make when wants exceed resources
• The economic problem o Opportunity costs:
 What do u give up and what do you get
 The bests alternative
 The value that you could’ve gained by doing/purchasing the next best alternative
 E.G. Olympic Power
• Financial Opportunity cost: o Covering all her annual expenses o Saving money
• Other opportunity costs: o A social life and a family life
• She gives up: o $26000, family, social life, job security, other hobbies, further education
• She gets: o $10000, satisfaction, fame, fit, experience, travel, potential of a gold medal o What to produce o How to produce o For whom to produce o Where to produce o When to produce
• Production Resources: o Land:
 Raw materials
 From nature o Labor
 Human effort to make things o Capital
 Things you make to help make other things
• E.g. an assembly line o Entrepreneurship
 Initiative
 Management
 Risk taking
• Economic thinking: o Choices, tradeoffs and opportunity costs o Margins and incentives
 Marginal cost- the cost if an increase in an activity
 Marginal benefit- the benefit that arises from an increase in activity o Voluntary exchange and efficient markets
 Voluntary exchange: money for goods
 Efficient markets: the transfer of goods to satisfy a customer o Market failure government intervention
• What economists do o Microeconomists: study the decisions made by individual people or businesses o Macroeconomists: study the decisions made by the national and global economies o Normative statements:
 What should be
 An opinion o Positive statements:
 What is
 Can be proven true or false o Observation and measurement o Model building o Festing models
End of Lecture #1
September 21st: Lecture #2
• CHAPTER 2: THE ECONOMIC PROBLEM
• Production possibilities and opportunity costs
• Quantities of what we can produce are limited by our resources and technology
• Increasing the production of one good means decreasing the production of another a tradeoff
• The PRODUCTION POSSIBILITIES FRONTIER (PPF) is the boundary btw/ the goods that can be produced and those that cannot o For e.g. the pair of coal and pizza o Fig 2.1 pg. 32 o This PPF shows scarcity because we cannot attain the points outside the frontier o These points describe wants that cant be satisfied o Other production possibilities
• Production efficiency o Achieved by producing goods at the lowest cost o Shows on the PPF points inside are inefficiently produced because we are giving up more than necessary of one god to produce another good o Production is inefficient because resources are unused or misallocated
• Tradeoff along the PPF o Every choice along the PPF involves a tradeoff o At any given point we have a fixed amount of labor, land, capital and entrepreneurship o Limited to what we can produce o This limit defines a boundary on goods wee can attain and goods we cannot the real world PPF o We can only produce more of one good or service if we produce less of another o All tradeoff involve a cost opportunity cost
• Opportunity Cost o Of an action is the highest valued alternative o PPF enables us to calculate opp cost o If we produce more pizza we must give up some

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