micro1SG - (5 information is costly to acquire(6 decisions...

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ECO 2023 Principles of Microeconomics Chapter 1 The Economic Approach Key Terms: Scarcity Resource Capital Opportunity cost Economizing behavior Marginal Secondary effects Ceteris paribus 4 Goals: #1 - Identify the critical components of economics. Economics is the study of people making choices in the face of scarcity. Scarcity forces rationing and competitive behavior is a consequence of scarcity. #2 - Understand and learn how to use the eight guideposts of economic thinking. Eight guideposts: (1) trade-offs must be made because the use of scarce resources is costly (2) people engage in economizing behavior (3) incentives dictate people’s decisions (4) individuals make decisions at the margin
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Unformatted text preview: (5) information is costly to acquire (6) decisions often generate secondary effects (7) the value of a good is subjective (8) the ability to predict is the test of a theory. #3 - Distinguish between two types of economic statements. A positive statement is objective while its purpose is to explain, and a normative statement seeks to include a value judgment. #4 - Avoid making four common mistakes. Four common mistakes: (1) wrong conclusions can be drawn when the ceteris paribus condition is violated (2) good intentions do not necessarily generate desirable results (3) association is not causation (4) the fallacy of composition- what’s good for one person is good for a group of people....
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