ECO105 - Module 1

Introduction to Microeconomics

Problem of scarcity

Arises because of limited time, money, and energy.

Opportunity Cost

The true price of anything. Opportunity cost > money cost.

Incentives

Rewards and penalties for certain actions.

Rewards

Positive incentives.

Penalties

Negative incentives.Consequences or costs for certain actions.

Absolute Advantage

Being able to create a product definitely cheaper than another group.

Comparative Advantage

Being able to create a product at a cheaper opportunity cost than another group. Key to mutually beneficial gains from trade.

Opportunity Cost

Give Up / Get

Production Possibility Frontier

A graph showing the highest potential quantity that can be produced between two goods with the existing inputs put into consideration.