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Econ 201, Lecture 2

by: Fiona Crewe

Econ 201, Lecture 2 Econ 201

Fiona Crewe
Concordia University

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About this Document

Covers basic principles of micro.
Principles of Economics: Microeconomics
Dr. Moshe Lander
Class Notes
Microeconomic, Economics
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This 2 page Class Notes was uploaded by Fiona Crewe on Friday September 23, 2016. The Class Notes belongs to Econ 201 at Concordia University taught by Dr. Moshe Lander in Fall 2016. Since its upload, it has received 8 views. For similar materials see Principles of Economics: Microeconomics in Economic Sciences at Concordia University.

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Date Created: 09/23/16
Micro ­ Lecture 2      Recap  All aspects of our life are about scarcity so we have to make choices  Eg efficiency VS equity    Focusing on equity leads to a lower standard of living  ­economy where everyone makes the same income: people won't work hard, standards will  lower    Forcing equity on people means no one wants to work  Nobody uses resources, efficiency is lowered    Even the "socialist paradises" (Sweden, Finland, Norway) do not focus on equity ­ they build  strong institutions instead and are becoming less socialist, not more.    When there isn't equity, every  one is forced to be efficient  ­work hard  ­use all their resources  ­have a higher standard of living  ­which necessarily creates inequality    Every choice you make means giving something up that has value  Value forgone = opportunity cost  It's everything else you could've been doing/buying instead  Opportunity cost is the value of the best possible alternative option    All choices can be viewed through the lens of opportunity cost    Education has a significant opportunity cost  ­tuition, rent, etc but ALSO you can't have a full time job or do other things    Economics assumes everyone behaves rationally  Rationality: based on what you know at the time, you will always choose what you think is best  for you    Obese people think that eating the McDonald's hamburger is the best choice because they are  hungry and losing weight is difficult. It seems like a good idea at the time. The consequences do  not seem harsh enough to justify eating something healthier.    Your choices are your fault.    NGRI: You decided to be insane, which lead you to murder someone. It was a choice. Based on  what you knew, you felt it was best to kill someone. Later you might see things differently, but at  that moment you make a decision with the info you have.    Decision making is based on self interest. Even philanthropy is self­interest ­ it makes you feel  good.    People respond to incentives. IP  Incentive: a punishment or reward that motivates you  An exam is an incentive to study.  Choices are governed by incentives.    Trades make things better for everyone.  E.g. trading money for an Ice Cap at Tim Hortons    Trading means giving up scarce resources in order to get something equally or more valuable.  BOTH SIDES end up better off.  Caveat: trades must be voluntary. This is called FREE TRADE.    Free trade is good for everyone.    Everyone trades  ­money & time for knowledge  ­time for money  ­money for goods  etc    Markets are a good way to organize an economy.    An economy answers basic questions:  What to produce?  How much?  How to produce it?  For whom?  Every economy must answer this, whether communist or capitalist. Buyers & sellers + govt  answer this. When buyers & sellers answer it is more efficient.    Govt should not tell you what to produce.           


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