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ECON 200 - Review Questions #1

ECON 200 - Review Questions #1 - Antonio Alarcn ECON 200...

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Antonio Alarcón ECON 200 Review Questions #1 1/25/08 1. Define economics, microeconomics, and macroeconomics. Economics – The study of choice under conditions of scarcity Microeconomics – Branch of economics that focuses on the choices made by individual households and firms and the effects of such choices on particular markets Taxes and effects on a particular population Market choices; decreasing price relative to a competitor Macroeconomics – Concerned with the overall performance of the economy; focuses on the behavior of the economy itself Cause of unemployment Cause of inflation Reasons for economic growth and decline 2. Why is economics considered a Social Science? Economics takes into account the behavior of humans in terms of individual supply/demand 3. The best way to eliminate scarcity is to lower the prices of the scarce goods and services. Largely a normative economic statement; additionally an impractical solution. Goods and services are not deemed scarce on the basis of their cost but rather their limit in nature. 4. The relationship between choice and scarcity is one of the cause and effect. Which is the cause? Which is the effect? Explain. Scarcity causes choice; choice is a result of scarcity. Scarcity means that there are not enough, or can never be enough, to satisfy the wants and needs of every individual. 5. Define opportunity costs. Explain why every choice has a cost. Opportunity cost – The value of the best alternative sacrificed Scarcity forces individuals to make choices that involve giving up another opportunity to do or use something else Part of the cost of attending a Bull’s game is the price of the ticket. This price represents the other goods and services you could have purchases with that money instead. In addition, there is the most valuable alternative use of the time devoted to watching the game
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Antonio Alarcón ECON 200 Review Questions #1 1/25/08 6. Consumer sovereignty is an integral part of a democratic society. Why?
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