micro exam 1

micro exam 1 - Economics the social science dealing with...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics – the social science dealing with the use of scarce resources to obtain the maximum satisfaction of society’s virtually unlimited economic wants Economic perspective - a viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions. Rational behavior - is a decision making process that results the most optimal level of benefit or utility for the individual. It suggests that individuals will make different choices because their preferences and circumstances differ. Utility – the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from goods and services). Opportunity cost – is the cost related to the next best choice available to someone who has picked among several mutually exclusive choices. Economists employ scientific method in which they form and test hypotheses of cause and effect relationships to generate theories, laws, and principles. Marginal analysis balances the additional benefits from an action against the additional cost Economic principle is a widely accepted generalization about the economic behavior of individuals or institutions. Other things equal assumption states that all variables except those under immediate consideration are held constant for a particular analysis Macroeconomics looks at the economy as a whole or its major aggregates Aggregate is a collection of items that are gathered together to form a total quantity, all prices of individual goods and services are combined into a price level or all units of output are aggregated into real gross domestic product. Microeconomics examines specific economic units or institutions Positive economics – The analysis of facts or data to establish scientific generalizations about economic behavior Normative economics – expresses value judgments about economic fairness or what economy ought to be. Economizing problem – Individuals or Society face this problem because the wants for goods and services exceed the income and the resources available (scarce), a decision must be made what to purchase and what to forgo. Budget line – A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products’ prices. Economic resources – are inputs into the production process and can be classified as land, labor, capital, and entrepreneurial ability, they are known also as inputs or factors of production
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Land -Natural resources ("free gifts of nature") used to produce goods and services. Labor - People’s physical and mental talents and efforts that are used to help produce goods and services. Capital
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/28/2010 for the course ECON 211 taught by Professor Burn during the Spring '08 term at RIT.

Page1 / 8

micro exam 1 - Economics the social science dealing with...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online