Chapter 1

Chapter 1 - Chapter 1 What is Economics Ideas for Beyond...

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Chapter 1 – What is Economics? Ideas for Beyond the Final Exam Idea 1: How Much Does It Really Cost? o The Opportunity Cost of some decision is the value of the next best alternative that must be given up because of that decision (for example, working instead of going to school). Idea 2: Attempts to Repeal the Laws of Supply and Demand – The Market Strikes Back Idea 3: The Surprising Principle of Comparative Advantage Idea 4: Trade Is a Win-Win Situation Idea 5: The Importance of Thinking at the Margin Idea 6: Externalities – A Shortcoming of the Market Cured by Market Methods Idea 7: The Trade-Off between Efficiency and Equality Idea 8: Government Policies Can Limit Economic Fluctuations – But Don’t Always Succeed Idea 9: The Short-Run Trade-Off between Inflation and Unemployment Idea 10: Productivity Growth is (Almost) Everything in the Long Run Inside the Economist’s Tool Kit Economics as a Discipline The Need for Abstraction o Abstraction from unimportant details is necessary to understand the functioning of anything as complex as the economy. o Abstraction means ignoring many details so as to focus on the most important elements of a problem.
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Chapter 1 - Chapter 1 What is Economics Ideas for Beyond...

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