Economic way of thinking - Introduction to Economics
Economic way of thinking
Lessons
Notes:
Five Key Ideas
- Rational Choices
- A choice which use available resource to obtain maximum net benefit. People compare the benefit and cost in each choice and pick the choice that yields the largest net benefit.
- Cost
- The opportunity cost of something is the best thing we must give up to get it.
- Benefit
- The benefit of something is the gain or pleasure that it brings
- Choices are Made at the Margin
- A margin is like an edge from which a choice is to be made. When a choice is changed by a little at a time, then eventually the choice is made at the margin
- Marginal Benefit (MB): what you gain from one unit of something
- Marginal Cost (MC): the opportunity cost of one-unit increase
- Choice is made when MB = MC, because this gives the maximum net benefit.
- Respond to incentives
- Incentive is a reward or penalty that encourages or discourages an action. Making choices will leads us to respond to incentives
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Intro Lesson
Economic Way of Thinking Overview:
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a)
Benefit - Cost
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b)
Benefit + Cost
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c)
Cost - Benefit
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d)
Benefit
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a)
MB > MC
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b)
MB < MC
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c)
MB ≠ MC
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d)
MB = MC
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a)
Costs
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b)
Benefits
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c)
Margins
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d)
Incentives
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a)
Increase the unit
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b)
Decrease the unit
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c)
Let the unit stay the same
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d)
Examine the Net Benefit
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