Unit 1: Econ Test Review
Chapter 1:
Economics
: how people allocate their limited resources to satisfy their unlimited wants; the study of how people make choices.
Microeconomics
:
decision making undertaken by individuals (or households) & by firms.
Ex. Pollution, healthcare, crime, education
Macroeconomics
:
The study of the behavior of the economy as a whole (ex. Inflation, taxes, unemployment)
Rationality Assumption
:
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.
Incentives
: costs & benefits
(+) commisions, rebates, bonuses; (-) jail, tickets
Model
: simplified representations of the real world used as the basis for predictions or explanations (predict how people react, not
think)
Ceteris Paribus Assumption
:
nothing changes expect the factor(s) being studied
Positive economics
:
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
Normative economics
:
Analysis involving value judgements- a statement of what ought to be; “should, believe, ought”
Chapter 2:
Scarcity
: 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,
entrepreneurship
Needs
: are objectively basic; wish, want, life saving necessity; water, food shelter
Wants
: desirable goods people wish to have, unlimited, “needs in excess”
Opportunity cost
:
highest-value, next-best alternative, they must be given up (sacrificed) to attain something or satisfy a want.
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- Fall '07
- GRAF,PAULEDWIN
- Economics, Microeconomics, Comparative Advantage, Opportunity Cost, production possibilities, income tax rates, Econ Test Review
-
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