Aug 24th Notes - Scarcity

Scarcity Scarce: when a resource is in limited supply. Ex. Water, oil, money. fundamental problem of economics. There aren't enough resources to satisfy the wants of people. *nothing is free!!!!!!!!!!!!! Think about where it came from. Every choice you make has a cost -opportunity cost: when you make the decision to buy an item, you lose the potential or ability to buy something else. -every decision involves opportunity cost. "needs vs wants" -a need is a basic requirement for survival. -A want is a way of expressing your need. -In order to make choices, you need to understand your needs and wants. "Maslow's Hierarchy of Needs" 1. Self actualization 2. Esteem needs 3. Social needs 4. Safety needs 5. Physiological needs "Rational Behavior and Balance" -Scarcity forces us into a system of rational behavior. -You have to balance your needs and wants against your limited resources. -Economics is grounded in the assumption of rational self-interest. "Perspective and Incentives" Why do people behave differently if everyone else is working under rational self-interest? It comes down to perspective. They feel that the incentive from doing these things is worth working towards. "Margin" -Is a border or an edge. -A choice made on the margin is a choice made by comparing all the relevant alternatives. -Most economic choices change the "Status Quo" "Marginal Benefit" What you gain when you acquire one more unit of something. "Marginal Cost" What you lose when you acquire one more unit of something. You have to weigh the Marginal Benefit vs the Marginal Cost to decide if a decision is worth it or not Sent from my iPad