ECON 101_ Chapters 1-3 Flashcards _ Quizlet 5 -...

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8/25/2016 ECON 101: Chapters 1­3 Flashcards | Quizlet ­101­chapters­1­3­flash­cards/ 1/3 ECON 101: Chapters 1-3 27 terms by sarhamanninq theory A deliberate simplification of relationships used to explain how those relationships work. correlation Two variables are said to be correlated if they tend to go up or down together. Correlation need not imply causation. abstraction Ignoring many details so as to focus on the most important elements of a problem. economic model A simplified, small-scale version of an aspect of the economy. Economic models are often expressed in equations, by graphs, or in words. opportunity cost The value of the next best alternative that must be given up because of that decision (for example, working instead of going to school). Nations can gain from trade by exploiting their comparative advantages Both parties can gain in a voluntary exchange Good decisions typically require this, which weighs added costs against added benefits.

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