Unit 1: Econ Test Review
: how people allocate their limited resources to satisfy their unlimited wants; the study of how people make choices.
decision making undertaken by individuals (or households) & by firms.
Ex. Pollution, healthcare, crime, education
The study of the behavior of the economy as a whole (ex. Inflation, taxes, unemployment)
the assumption that people do not intentionally make decisions that would leave them worse off; more is
better; act in their own self interest in a rational manner.
: costs & benefits
(+) commisions, rebates, bonuses; (-) jail, tickets
: simplified representations of the real world used as the basis for predictions or explanations (predict how people react, not
Ceteris Paribus Assumption
nothing changes expect the factor(s) being studied
purely descriptive statemenst or scientific predictments- statement of what is; “of fact,” true of false, what you
learn; conditional statements, ‘will’ ‘if A, then B,’ objective
Analysis involving value judgements- a statement of what ought to be; “should, believe, ought”
: occurs when the ingredients (resources, inputs) for producing thing that people desire are insufficient to satisfy all wants.
NOT a shortage or poverty; “the economic problem”
Factors of production
: Land (natural resources), Labor (the human resource), physical (machinery) & human (education) capital,
: are objectively basic; wish, want, life saving necessity; water, food shelter
: desirable goods people wish to have, unlimited, “needs in excess”
highest-value, next-best alternative, they must be given up (sacrificed) to attain something or satisfy a want.
TANSTAAFL; forgone opportunity