Eco Ch01

Eco Ch01 - about how people will behave or react to change...

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1.1 Economics: The study of the allocation of our limited resources(input used to produce goods and service) to satisfy our unlimited wants. Scarcity: Exists when human wants exceed available resources. The economic problem: Scarcity forces us to choose and choices are costly because we must give up other opportunities that we value. 1.2 Self-interest: It’s a good predictor of human behavior in most situations. Rational behavior: It merely means that people do the best they can, based on their value and information, under current and anticipated future circumstances. It applies to the action people take to pursue their own goals and means that people learn from past and their decisions in the future reflect that information. 1.3 Theory: It’s an established that accounts for known facts or phenomena. It’s a statement or proposition used to explain and predict behavior in the real world. Hypothesis: A testable proposition. In economic theory, a hypothesis is a testable prediction
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Unformatted text preview: about how people will behave or react to change in economic circumstances. Empirical analysis: The use of data to test a hypothesis. Ceteris paribus (Latin phrase): Letting everything else be equal or holding everything else constant. Microeconomics: The study of household and firm behavior and how they interact in the marketplace. Macroeconomics: The study of the whole economy, including the topics of inflation. Unemployment, and economic growth. Aggregate: The total amount-such as the aggregate level of output. 1.4 Correlation: when two things occur together. Causation: when one event brings about another event. The fallacy of composition: The incorrect view that what is true for the individual is always true for the group. 1.5 Positive analysis: an objective, testable statement that describe what happens and why it happens. Normative analysis: a subjective, contestable statement that attempts to describe what should be done....
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Eco Ch01 - about how people will behave or react to change...

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