Econ 201 1st Edition Lecture 2Outline of Last Lecture 1. Ten principles Economic OverviewOutline of Current Lecture 1.ten principles Economic (1~4)2.Examples of Opportunity costCurrent Lecture1. Ten Principles of EconomicsA. Individual Actors: People, Firms, Households, Governments 1. Tradeoffs - created by scarcity and manifested in choice.2.Opportunity Cost - the thing traded off; Implicit and explicit elements.Cost of attending college: handout & discussion.Mangoes as the cost of Thatch and vice versa3.Marginal evaluation is rational. Thinking at the margin leads to good decisions. Marine transport: Shanghai to Rotterdam4.People respond to incentives. Material incentives are more powerful than moral. Captains and prisoners on the voyage to Australia.Examples of Opportunity costThe Opportunity Cost of CollegeThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.What is the cost to a young woman (who loves her car) of attending college for one academic year (9 months). Find the opportunity cost, not the necessary financial outlays. All numbers are in dollars.Financial outlays:Tuition 5000 per academic year Dorm cost 400 per monthFees 450 per academic year Auto payments 250 per monthBooks 500 per academic yearOther features of her circumstances:– She receives a scholarship of 1500 if she attends college.– She must live in the dorm while attending college.– She keeps the car whether working or going to college.– Cost of shelter when she is not at college: 300 per month.– She has a job where she earns 2000 per month. Although during the summer she can work here, when classes are in session the required study is so burdensome that she doesn’t work at all. Cost = ___________________________Answer =23,350Opportunity Cost vs. Financial PlanOpportunity Cost Financial PlanTuition 5,000 Tuition 5,000Fees 450 Fees 450Books 500 Books 500Dorm Premium 900 Dorm 3,600Scholarship -1,500 Scholarship -1,500Forgone Wages 18,000 Auto Payments 2,250Total 23,350
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