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. |
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Money is scarce in the sense that most of us must live within a budget. |
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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. |
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An
essential rule - All decisions are made at the margin on the basis of benefits
and costs.
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Opportunities foregone must be included. | ![]() |
Sunk costs should not be included. | |
Ignore distasteful costs at your peril. | ![]() |
Not all costs and benefits are obvious: |
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Externalities | ![]() |
Production - consumption; negative - positive | |||
Public goods |
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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 |
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Moral hazard, adverse selection |