Chapter 1 - a state or condition that will continue...

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Economics 50 Chapter 1 – Analyzing Economic Problems 1. Why Study Microeconomics? 2. Three Key Analytical Tools 2.1. Exogenous variable – a variable whose value is taken as given in the analysis of an economic system 2.2. Endogenous variable – a variable whose value is determined within the economics system 2.3. Constrained optimization – an analytical tool for making the best (optimal) choice, taking into account any possible limitations or restrictions on the choice 2.4. Objective function – the relationship that a decision maker seeks to maximize or minimize 2.5. Constraints – the restrictions or limits imposed on a decision maker in a constrained optimization problem 2.6. Equilibrium
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Unformatted text preview: a state or condition that will continue indefinitely as long as factors exogenous to the system remain unchanged 2.7. Comparative statics analysis used to examine how a change in some exogenous variable will affect the level of some endogenous variable in an economic system 3. Positive and Normative Analysis 3.1. Positive analysis analysis that attempts to explain how an economic system works or to predict how it will change over time What is happening? 3.2. Normative analysis analysis that typically focuses on issues of social welfare, examining what will enhance or detract from the common good What should be done?...
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