Department of Economics
Intermediate Microeconomic Analysis
Economics 201 is about making you a better decision maker.
Time is a scarce resource for all of us, in many different ways. Name some of the ways in which time is a scarce resource for you.
|Money is scarce in the sense that most of us must live within a budget.|
|Some of our resources are non-renewable. If we use them today then there will be none tomorrow. We must give some thought to the use of even renewable resources. Will we ever run out of oil?|
|'your stomach' also understands the notion of scarcity.|
An essential rule - All decisions are made at the margin on the basis of benefits and costs.
Pitfalls in Applying the Rule
|Opportunities foregone must be included.|
|Sunk costs should not be included.|
|Ignore distasteful costs at your peril.|
Not all costs and benefits are obvious:
|Externalities||Production - consumption; negative - positive|
|High||Commons Good (Fish in the Ocean)||Public Good (Defense)|
|Low||Private Good (Wheat)||Collective Good: (Pay-per-view TV)|
||Moral hazard, adverse selection|