Economic way of thinking - Introduction to Economics

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Economic way of thinking

Lessons

Notes:

Five Key Ideas

  1. 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.
  2. Cost
    • The opportunity cost of something is the best thing we must give up to get it.
  3. Benefit
    • The benefit of something is the gain or pleasure that it brings
  4. 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.
  5. Respond to incentives
    • Incentive is a reward or penalty that encourages or discourages an action. Making choices will leads us to respond to incentives
  • Intro Lesson
    Economic Way of Thinking Overview:
    • a)
      Benefit - Cost
    • b)
      Benefit + Cost
    • c)
      Cost - Benefit
    • d)
      Benefit
    • a)
      MB > MC
    • b)
      MB < MC
    • c)
      MB ≠ MC
    • d)
      MB = MC
    • a)
      Costs
    • b)
      Benefits
    • c)
      Margins
    • d)
      Incentives
    • a)
      Increase the unit
    • b)
      Decrease the unit
    • c)
      Let the unit stay the same
    • d)
      Examine the Net Benefit
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Economic way of thinking

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