Economics Final Study Guide

Economics Final Study Guide - Economics ~ Final Study Guide...

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Economics ~ Final Study Guide Chapter 1 - scarcity o there is less of a good freely available from nature than people would like - resources o an input used to produce economic goods o examples: land, labor, skills, natural resources and capital - capital o human made resources o used to produce other goods and services o examples: tools, equipment and structures - objective o a fact based on observable phenomena that is not influenced by differences in personal opinion - subjective o an opinion based on personal preferences and values judgments - Rationing o Allocating a limited supply of a good or a resource among people who would like to have more of it - economic theory o a set of definitions, postulates and principles assembled in a manor that makes clear the “cause and effect” relationships - opportunity cost o the highest value alternative o that must be sacrificed as a result for choosing an option - economizing behavior o choosing the option that offers the greatest benefit at the least possible cost - Incentives matter - Marginal o Term used to describe the effects of a change in the current situation - Acquiring information is costly - Secondary effects o The indirect impact of an event or policy that may not be easily and immediately observable o In the area of policy these effects are both unintended and overlooked - the value of a good or service is subjective - positive economics o the scientific study of “what is” among economic relationships - normative economics o judgments about “what ought to be” in economic matters o they cannot be proven false because they are based on value judgments o “shoulds”
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- ceterias paribus o Latin for other things constant o it’s used when the effect of one change is being described recognizing that if other things change they could effect the result - good intentions do not guarantee desirable outcomes - association is not causation - Fallacy of Composition o The erroneous view that what is true for the individual will also be true for the group - microeconomics o the branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units - macroeconomics o the branch of economics that focuses on how human behavior effects outcomes in highly aggregated markets Chapter 2 - more in-depth with Opportunity cost - trade creates value - when individuals engage in a voluntary exchange, both parties are made better off - by channeling goods and resources to those who value them most, trade creates value and increases the wealth created by a society’s resources - transaction costs o the time, effort, and other resources needed to search out, negotiate and complete an exchange - middleman o a person who buys and sells goods or services or arranges trades o a middleman reduces transaction costs - property rights o the rights to use, control and obtain the benefits from a good or service - private property rights o property rights that are exclusively held by an owner and protected against
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This note was uploaded on 04/27/2008 for the course SSC 210B taught by Professor Lane during the Spring '08 term at MCPHS.

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Economics Final Study Guide - Economics ~ Final Study Guide...

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