Economics- ch.1 - ECON 203 Chapter 1 Limits Alternatives...

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ECON 203 September 22, 2007 Chapter 1: Limits, Alternatives, and Choices Opportunity costs: sacrifices Utility: the pleasure, happiness or satisfaction obtained from consuming a good or service. “Purposeful behavior” does not mean that people and institutions make no faulty logic decisions. They make mistakes Rational self-interest is not same as selfishness Marginal analysis: comparisons of marginal benefits and marginal costs (Economists) If marginal benefit > marginal cost = buy it! Economic principle – a statement about economic behavior or the economy that enables prediction of the probable effects of certain actions. Generalizations: generalizing economic behavior to the economy itself. Other-things-equal assumption: “ceteris paribus” – factors other than those being considered do not change. Graphical Expression Macroeconomics vs. Microeconomics Macroeconomics – economy as a whole or its basic subdivisions (govt, household, business sectors) Microeconomics – individual units (person, household, a firm, or an industry) Positive vs. Normative economics
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