Overview

1. Opportunity costs
2. PPF’s
3. Market economy

Readings Ch. 1 & ch2

Law of Increasing Costs: in order to produce extra amounts of one good, society must give up
ever-increasing amounts of the other good.

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The Market Economy: In economics, we assume that individuals act as if motivated by self-
interested and act in a rational way.

The Rationality Assumption: Individuals do not intentionally make decisions that will leave
them worse off.
The Players
● Households
○ Consumers of goods & services
○ Suppliers of factors of production
Objective: Maximize happiness

● Firms
○ Producers of goods & services
○ Consumers of factors
Objective: maximize profit

● Government
Objective: