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- Introduction to Economics
Economic way of thinking
- Intro Lesson: a1:42
- Intro Lesson: b2:07
- Intro Lesson: c5:30
- Intro Lesson: d2:39
- Lesson: 11:44
- Lesson: 22:24
- Lesson: 32:04
- Lesson: 41:58
Economic way of thinking
Lessons
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
- IntroductionEconomic Way of Thinking Overview:a)Rational Choices
- Comparing Benefit and Cost
- Net Benefit = Benefit - Cost
b)Cost and Benefit- Cost: the opportunity cost of something
- Benefit: the gain or pleasure that it brings
c)Choices are Made at the Margin- An edge from which a choice is made
- Marginal Benefit and Marginal Cost
- MB = MC
d)Respond to Incentives- Choices respond to incentives
- Incentives is a reward or penalty
- Encourages or Discourages action
- 1.Understanding the 5 Key Ideas
Net benefit can be calculated by using the formula:a)Benefit - Costb)Benefit + Costc)Cost - Benefitd)Benefit - 2.The maximum benefit can be found whena)MB > MCb)MB < MCc)MB ≠ MCd)MB = MC
- 3.Making rational choices will lead us to respond to _________________.a)Costsb)Benefitsc)Marginsd)Incentives
- 4.When the Marginal Benefit is great than the Marginal Cost, then we want to:a)Increase the unitb)Decrease the unitc)Let the unit stay the samed)Examine the Net Benefit