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Economics Study Guide

Economics Study Guide - Christa Palazzo Economics Study...

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Christa Palazzo: Economics Study Guide Economics - study of the choices consumers, business managers and government officials make to attain  their goals, given their scarce resources.  It is a social science because it uses the scientific method  (developing models, testing a hypothesis and revising models) to study individuals reactions. 85%  standard of explanation.  Market-group of buyers and sellers of goods or services and the place where they come together to trade Three important ideas within markets : 1. People are rational- assume people use all available resources. Benefits outweigh costs 2. People respond to economic incentives- ex. Costs less for banks to deal with robbers than increase  security 3. Optimal decisions are made at the margin- some decisions are “all of nothing” most are “little  more little less” Marginal : The best decision is where marginal benefit = marginal cost Marginal analysis - way to compare MB and MC Fallacy composition  (fake construction): True to individual   true to group… yes or no Ex. At a game you cant see- stand on a chair- assume true for group but it might be harder for others to  see. Fire safety its true to group IF you follow instructions. Post Hoc Fallacy Event A  –-caused   Event B Assume this you commited post hoc.  Ex. A. throws chair throw window  B. Window Breaks } true A caused B In the real world there are many causes A B C D could be A D B C Correlation- seem to happen after each other for no cause or reason.
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