Review Exam 1 - Econ 002 Exam 1 Review Micro v. Macro...

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Econ 002 Exam 1 Review Micro v. Macro Economics Micro looks at parts and figures out how they fit together— building blocks for macro—studies decision making undertaken by individuals and by firms Macro studies the behavior of the economy as a whole (unemployment, general price level, national income) Economics—the study of how people make choices Thinking Like an Economist No such thing as a free lunch Not always costless Someone is footing the bill Decision-makers choose purposefully and rationally Economist view all actions as purposeful Using information at hand to make best possible decision Decisions are made at the margin Sociological explanation Psychological explanation Economic explanation—want everything, but at different levels Consider secondary events Distinguish between positive and normative economist Positive—examination of the facts alone—verifiable Normative—a personal opinion—subjective Incentives matter—incentives motivate people Movies Saving Private Ryan—opportunity cost A Knight’s Take—capital goods and growth Hudsucker—supply and demand Pretty Woman—consumer surplus? Coyote Ugly—auctioning The Full Monty—supply and demand Pitfalls to Avoid Violating ceteris paribus —in a dynamic economy, the assumption of other things constant is not always valid—you can only change one variable at a time (paper airplan) Variables inside the model are endogenous Variables outside—exogenous Association is not necessarily causation (skiing and winter)
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The fallacy of composition—what is true for the individual may
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This note was uploaded on 03/30/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Spring '08 term at Pennsylvania State University, University Park.

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Review Exam 1 - Econ 002 Exam 1 Review Micro v. Macro...

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