Midterm Review - Midterm Review Chapter 1: Introduction...

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Midterm Review Chapter 1: Introduction Normative vs. Positive Statements o Positive Statement: A statement that can either be true or false o Normative Statement: A statement one feels things ought to be judgment Explanation and Refutable Propositions o Explanation: Interpretation of events In terms of some more general proposition or laws o Statements or Propositions that could be arguably wrong Know why in economics we use positive statements and why we use refutable propositions Scarcity vs. Limited o Scarcity: There is not enough of a good to fulfill the desire for the good for all humans if it were handed out freely o Limited: Doesn’t necessarily have to be a good Opportunity Cost: Incorporates the cost of foregone opportunities by partaking in an economic activity o We assume in economics that during a period of study (so over a given time interval), that T & P (e.g. I prefer organic veggies to non-organic) do not change. Therefore, any observed changes in a person’s consumption during the study is due to a change in constraints (e.g. prices and income) o We make this assumption because it is hard to measure an individuals preferences, whereas it is relatively easy to measure constraints o Law of Demand: If the price of a good goes up than the quantity demanded goes down. This results in a downward sloping demand curve o Supply Curve: If the price of good increases, than a producer is willing to bring more goods to the market. This results in an upward sloping supply curve o The intersection of these two curves is the market equilibrium. Below the market equilibrium will be a price of $2.50, and 15 units of the good will be sold
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Chapter 2: Economic Behavior Postulates of Behavior o I: People have preferences o II: More is preferred to less o III: People are willing to substitute o IV: Diminishing marginal values
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This note was uploaded on 05/04/2008 for the course ECON 200 taught by Professor Ta during the Spring '07 term at University of Washington.

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Midterm Review - Midterm Review Chapter 1: Introduction...

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