lo1 marginal analysis comparison of mb & mc more school? study? supersize fries? marginal...
TRANSCRIPT
![Page 1: LO1 Marginal Analysis Comparison of MB & MC More school? Study? Supersize Fries? Marginal benefit Marginal cost Marginal means “extra” Opportunity Cost](https://reader036.vdocuments.mx/reader036/viewer/2022082821/5697bfeb1a28abf838cb7fb0/html5/thumbnails/1.jpg)
LO1
Marginal Analysis
• Comparison of MB & MC
• More school? Study? Supersize Fries?
• Marginal benefit
• Marginal cost
• Marginal means “extra”
• Opportunity Cost
1-1
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LO2
Economic Principles
• The scientific method:
• Economic principles: Enables prediction of effects of certain actions.
1. Generalizations (P↓D↑)
2. Other-things-equal assumption (Focus only of Pepsi and ignore Coke)
3. Graphical expression
Observe hypothesis Test the hypothesis
Accept, reject, or modify the hypothesis
Continue to test the hypothesis, if necessary
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LO3
Microeconomics and Macroeconomics
• Microeconomics
• Decision making by individual units
• Macroeconomics
• Aggregate
1-3
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LO3
Positive and Normative Economics
• Positive economics
• Deals with economic facts (what is)
• Normative economics
• A subjective perspective of the economy (what ought to be)
1-4
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LO4
Limited Income
1-5
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LO4
Individual’s Economizing Problem
• Limited income…yes even Trump.
• Unlimited wants (goods and services; always changing)
• A budget line
• Schedule or Curve
• Attainable and unattainable options
• Tradeoffs and opportunity costs
• Make the best choice possible
• Change in income
1-6
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LO4
Budget Line and Graph (p.9)
6543210
02468
1012
DVDs$20
Books$10
$120 Budget 12
10
8
6
4
2
02 4 6 8 10 12 14
Quantity of Books
Qua
ntity
of D
VDs
Income = $120Pdvd = $20
= 6
Income = $120Pb = $10
= 12
Attainable
Unattainable
1-7What is the opportunity cost of buying 1 DVD?