Objective Sheets Chapter 1 2 & 3

Objective Sheets Chapter 1 2 & 3 - Objective...

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Economics T-Th A. Ordonez Asch T. Hawthorn 809-195-3K1C 2/10/10 Chapter 1& 2 - *Define the following: Opportunity Cost - of an item is what you give up to obtain that item. Marginal Changes - are small incremental adjustments to an existing plan of action. Productivity - is the amount of goods and services produced from each hour of a worker's time. Externality - is the impact of one person or firms actions on the well-being of a bystander. Market Economy - is an economy that allocates its resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Households decide what to buy and who to work for. Firms decide what to sell and who to hire. Market Power - is the ability of one person or firm to unduly influence market prices. Inflation - an increase in the overall level of prices in the economy o One cause of inflation is the growth in the quantity of money. o When the government creates large quantities of money, the value of money falls. *Give 3 examples of important trade-offs that you face in your life: 1. Time for education. 2. Knowledge for 'work' (side jobs - I accept barter system). 3. Gas usage or fishing time. *What does the "Invisible hand" of the marketplace do? Adam Smith observed that households and firms interacting in markets act as if guided by an invisible hand Because households and firms look at prices when deciding what to buy and what to sell, they unknowingly take into account the social costs of their actions. As a result, prices guide decision makers to reach outcomes that tend to maximize the welfare of society as a whole. *Explain 2 main causes of market failure and give an example of each. 1. Externality a. is the impact of one person or firms actions on the well-being of a bystander. is the ability of one person or firm to unduly influence market prices.
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This note was uploaded on 05/10/2010 for the course ECONOMICS 809-195-3K taught by Professor A.ordonez during the Spring '10 term at Gateway Tech.

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Objective Sheets Chapter 1 2 & 3 - Objective...

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