Test 1 material

Test 1 material - 8-28-071.Economicsa.the study of...

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Unformatted text preview: 8-28-071.Economicsa.the study of wisedecisions when wise decisions are desirable (always)2.We must make decisions because of scarcity(cant do everything without your time and money)3.Never say need and cant afford4.Scarcitya.Unlimited wants with limited resourcesb.TANSTAAFL- There aint no such thing as a free lunchi.Producing one thing with resources prevents producing something elseii.You pay for it/someone else does, some resources are usediii.Positiveprices for goods (zero goods=free)1.Scarcity does not = poverty2.Scarcity will always be with us3.Poverty can be eliminated by growth5.Must choose, no decision is still a decisiona.Saving means consuming at a later time6.Wise choicesa.Choices with benefits > cost (as seen by the decision-maker)b.Wise choices are rational choices7.De gustibus non est disputanduma.Tastes are beyond disputei.Cant tell someone is wrong if they like ice cream8.Discrete Choicesa.Some choices can be discreteb.(0-1) Do it or dont do itc.Benefits > costi.Get marry, not get marry, buy car, not buy car9.Continuous Choicesa.Most choices are continuousb.One can do a little more/less of somethingi.Study more math/chemistry10. Marginal benefit decreases, if you have more of somethinga.Typically marginal benefits fall as more of any activity is done; marginal costs tend to rise i.0 pizza, one more is a lotii.5thslice, 6thwont mean that much to youA* is when MC=MBMB & MC are both subjective11. Pricesa.Actual dollar value12. Costsa.What person gives up i.Rich give up one vacation to buy a BMW13. Economic Reasoning will involve incentives (not taste changes)a.To change behavior- altered opportunities are what economists assume alters behaviori.Income/prices? In 1950s, each average woman had 3.3 children, in 2007 this is 1.9, why?After war/depressionChanged to urban environment (kids as investment)Change attitudes towards female entry into labor forceBirth control options8-30-071.Economists dont care what people like to but whytheir tastes changea.Very few good theories of taste formationb.Giventastes, changed behavior is expected (by economists) to be due to changed opportunities 2.Lack of Realismis not only not a flaw but in fact is actually desirablea.Realistic model is just as complicated as real world that were trying to understandi.Map of Colorado with stop signs and all bumps in roadb.Good modelswill depend on the class of events you are interested inc.Always want a simple modeld.Theory for model-building is useful to the extent that you can explain & predict3.Economists can predict what will happen but never know when it will happena.Evolution- lose the little toe, but never know when4.Flaws of reasoninga.Attacking the person-ad hominen (latin)i.Bush is stupid so cant solve problems in middle eastb.Appealing to the masses- ad populeni.The honesty and hardworking people deserve healthcarec.Failure to hold other things contstand- ceteris parabusd.Correlation & timing of events do not necessarily imply causationi.i....
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Test 1 material - 8-28-071.Economicsa.the study of...

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