Topic 1: Basic Concepts

Key Points

  1. Define scarcity
  2. State why scarcity means people must choose
  3. Learn about opportunity cost.
  4. Understand the role of rational self-interest in decision-making
  5. Analyze how opportunity cost affects rational choices
  6. State how and why people generally respond predictably to incentives.
  7. Learn the three fundamental resource allocation questions.
  8. Understand the relationship between resource allocation and economic efficiency.

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