Economics 201 Study Guide One

Economics 201 Study Guide One - Economics 201 Study Guide...

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Economics 201 Study Guide One Opportunity Cost: The best foregone opportunity to a choice OC x = Max # of x 1 Max # of x Comparative Advantage: The idea that is everybody specializes at what they do best compared to the rest of the group, they could have more of everything if they specialize in that and turn trade Economics: Science in which studies human behavior as a relationship b/t ends and scarce means which have alternative uses What makes economics a science? The scientific method (1) guiding the process of discovering the incentives (2) that govern the behavior of individuals (4) in the context of the society (3) they construct. 1. Scientific method: Economics models are a simplified view of the world 2. Incentives: Reasons that govern the behavior of individuals 3. Context of society: Incentives must be recognized within society, what works in one culture may not work in another 4. Behavior: defined by choices Microeconomics: Study of the individual firms and household and how they interact What kind of assumptions do economists make? 1. People are Rational: If A > B and B > C, then A > C. Does not imply people are fully informed or will always make the right decision. They will get it right "On Average". You may rationally get a 'F' in this class. 2. Marginal Analysis: Always do things until the Marginal Benet is equal to its Marginal Cost. Example: Should the Airline never lose a bag? Should we be 100% invulnerable to a terrorist attack?
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This note was uploaded on 06/01/2010 for the course COMM 308 taught by Professor Durbin during the Spring '10 term at WVU.

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Economics 201 Study Guide One - Economics 201 Study Guide...

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