economics key points -...

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ingredients of economic analysis. A good is  scarce   when   the   human   desire   for   it  exceeds the amount freely available from  nature.   Scarcity   requires   us   to   choose  among available alternatives. Every choice  entails a trade-off. Every   society   will   have   to   devise   some  method   of   rationing   scarce   resources  among competing uses. Markets generally  use   prices   as   the   rationing   device.  Competition is a natural outgrowth of the  need to ration scarce goods. Absence of poverty implies that some basic  level of need has been met. An absence of  scarcity implies that our desires for goods  are   fully   satisfied.   We   may   someday  eliminate poverty, but scarcity will always  be with us. Economics   is   a   way   of   thinking   that  emphasizes eight points: 1. The   use   of   scarce   resources   to  produce   a   good   always   has   an  opportunity cost 2. Individuals   make   decisions  purposefully,   always   seeking   to  choose the option they expect to be  most   consistent   w/their   personal  goals 3. Incentives   matter.   The   likelihood   of  people choosing an option increases  decline 4. Economic reasoning focuses on the  impact of marginal changes because  costs that influence choices 5. Because   information   is   scarce,  uncertainty is a fact of life 6. In   addition   to   their   direct   impact,  economic   changes   often   generate  secondary effects 7. The   value   of   a   good   or   service   is  8. The test of an economic theory is its  the real world Economic science is positive; it attempts to  explain   the   actual   consequences   of 
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economic actions of “what is.” Normative  economics   goes   further,   applying   value  judgments   to   make   suggestions   about  “what ought to be” Microeconomics   focuses   on   narrowly  defined   units,   while   macroeconomics   is  concerned   w/highly   aggregated   units.  When shifting focus from micro to macro, 
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This note was uploaded on 02/06/2011 for the course ECON 130 taught by Professor Akiera during the Spring '11 term at University of Illinois, Urbana Champaign.

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economics key points -...

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