Unit 1 - Chapter 1

OK, now it is time to address this weeks course material. It will be helpful, though is not required, for you to have the eBook chapter open and readily available for reference.

This week we will cover the material from: eBook Chapter 1

How individuals make choices:ScarcityOpportunity costTrade-offsMarginal analysis

How individual choices interact:TradeGains from trade Specialization Equilibrium Efficiency and equity

All economics involves individual choice. People must make choices because resources are scarce. The cost of anything is what you must give up to get it—

all costs are opportunity costs.

Monetary costs are sometimes a good indicator of opportunity costs, but not always.

Many choices are not whether to do something but how

much. “How much” choices are made by making a trade-off at the margin.

• The study of marginal decisions is known as marginal analysis.

• Because people usually exploit opportunities to make

themselves better off, incentives can change people’s behavior.

• Does anyone have questions about this first section before we go on?

• A feature of most economic situations is the interaction of choices made by individuals, the end result of which may be quite different than what was intended.

• In a market economy, this takes the form of trade between individuals.

• Individuals interact because there are gains from trade. Gains from trade arise from specialization.

• Economic situations normally move toward equilibrium. • As far as possible, there should be an efficient use of

resources to achieve society’s goals. • But efficiency is not the only way to evaluate an

economy; equity may also be desirable, and there is often a trade-off between equity and efficiency.

Markets normally are efficient, except for certain well-defined exceptions.

When markets fail to achieve efficiency, government

intervention can improve society’s welfare.

That concludes our coverage of tonight’s Unit topic, Chapter 1. Does anyone have any questions on it?

If there are no more questions about the chapter material tonight, I will now open the floor to other questions any of you may have regarding the course or Unit. If anyone has general questions, now is the time to ask!

Seminar Conclusion

If no one has further questions, it is almost time for the seminar to close. I would like to take the opportunity first to thank each of you for attending the seminar, and wish you good night. Have a great week!