Temple University
Department of Economics

Economics 201
Intermediate Microeconomic Analysis

Introduction

Economics 201 is about making you a better decision maker.

Scarcity

	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
Public goods				Non-rival
				Low	High
		N o n e x c l u d a b l e	High	Commons Good (Fish in the Ocean)	Public Good (Defense)
			Low	Private Good (Wheat)	Collective Good: (Pay-per-view TV)
Information asymmetries		Moral hazard, adverse selection