pLecture 1
,1. People face trade-offs - Giving one goals to achieve another
2. The cost of something is - Refers to monetary costs and opportunity costs
what you give to get it
- The cost of an item/service/ activity in comparison to
the monetary value of what you’re giving up- cost
and benefits of the decision
- Opportunity cost: the next best alternative that you
give up to obtain that item (e.g giving up games for
school)
3. Rational People think at - Marginal change: small incremental changes to a
the margin given plan of action
● Marginal Cost (MC): cost associated
● Marginal Benefit (MB: benefit associated
, 4. People respond to - Incentive: reward or punishment that induces a
incentives person to act in a certain way
- Incentives affect the benefits and cost of decision
(e.g government policies consist of large sets of
incentives to encourage and discourage.
Supply and Demand ● Economist introduce a model of a market for goods
and services
Market and Competition
● Market: group of buyers and sellers of good/services
● Competitive Market: so many buyers and sellers that
has a negligible impact on the market price
● Market is perfectly competitive (PC). This include
aspects:
➢ Goods being offered for sales are all exactly
the same (homogeneous)
➢ Various buyers and sellers reduce the
likelihood of their influence on market price
● Price Takers: buyers and sellers accepting the market
price as given
Demand
● Quantity demanded: Refers to amount of good that
the buyers are willing and able to purchase
● Price affects the quantity demanded
● Law of demand: quantity demanded of good falls
(rises) when the price of goods (falls)
● Relationship price and quantity are represented by :
➢ Demand Schedule:
➢ Demand Curve
,1. People face trade-offs - Giving one goals to achieve another
2. The cost of something is - Refers to monetary costs and opportunity costs
what you give to get it
- The cost of an item/service/ activity in comparison to
the monetary value of what you’re giving up- cost
and benefits of the decision
- Opportunity cost: the next best alternative that you
give up to obtain that item (e.g giving up games for
school)
3. Rational People think at - Marginal change: small incremental changes to a
the margin given plan of action
● Marginal Cost (MC): cost associated
● Marginal Benefit (MB: benefit associated
, 4. People respond to - Incentive: reward or punishment that induces a
incentives person to act in a certain way
- Incentives affect the benefits and cost of decision
(e.g government policies consist of large sets of
incentives to encourage and discourage.
Supply and Demand ● Economist introduce a model of a market for goods
and services
Market and Competition
● Market: group of buyers and sellers of good/services
● Competitive Market: so many buyers and sellers that
has a negligible impact on the market price
● Market is perfectly competitive (PC). This include
aspects:
➢ Goods being offered for sales are all exactly
the same (homogeneous)
➢ Various buyers and sellers reduce the
likelihood of their influence on market price
● Price Takers: buyers and sellers accepting the market
price as given
Demand
● Quantity demanded: Refers to amount of good that
the buyers are willing and able to purchase
● Price affects the quantity demanded
● Law of demand: quantity demanded of good falls
(rises) when the price of goods (falls)
● Relationship price and quantity are represented by :
➢ Demand Schedule:
➢ Demand Curve
