Econ Study Guide Exam

Econ Study Guide Exam - Econ Study Guide Exam #1 Chapter 1-...

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Chapter 1- Nature of Economics Economics - science studying the choices people make to satisfy wants. (study of wants) Macroecomomics vs. Microeconomics - Micro involves decision making by households and individuals. Macro involves the economy on the whole, it deals with unemployment, price stability, and national income. Economists assume people make decisions based on their best interests. (Rationality assumption, also involves goals such as love, friendship, prestige, power), by assuming rationality models economists can develop ideas about how people choose to satisfy wants. Economists maintain that the unit of analysis is the individual; members of a group will pursue their own goals rather than the groups objectives. Positive economics is objective and scientific and deals with testable if this, then those hypotheses. Normative economics is subjective and deals with value judgments, what should be, or ought to be. Chapter 2 –Scarcity and the world of Trade-Offs Scarcity - individuals and communities do not have the resources to satisfy all their wants. If the price of good B is zero, and society cannot get all that it wants of good B, then B is scarce. Factors of Production - Land, the natural resource, Labor, Physical capital (machines, buildings and tools), Human capital (Educations and training), entrepreneurship (managing, organizing, assembling, and risk taking) Goods - anything from which people derive happiness (Economic goods are scarce, noneconomic goods are not scarce, services are intangible goods) Wants vs. Needs - needs are basic, could be a wish, want, or life-saving necessity / wants are needs in excess. Opportunity Cost - Arises due to scarcity, people must use trade-off options, highest valued next best alternative that must be given up to attain something or satisfy a want. Cost is always a forgone opportunity, limited resources and unlimited wants leads to scarcity which leads to choices which leads opp. Cost. (When resources are used for one activity the user is trading off the opportunity to use those resources on another activity. PPC
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Econ Study Guide Exam - Econ Study Guide Exam #1 Chapter 1-...

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