Introduction

Introduction - models to analyze issues. Models are...

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ECON 101 Introduction to Microeconomics Definition: Microeconomics is the study of the behavior of individual agents in the economy, such as consumers and firms, and the specific markets in which they make their decisions about resource allocation. Wheel of Wealth 1. Consumers 2. Firms 3. Government Basic Principles of Microeconomics: (1) Because resources are limited, there are trade-offs and individuals and firms must make choices among alternatives. (2) Microeconomics assumes that individuals are engaged in rational maximizing behavior. Corollaries: (a) Individuals respond to incentives. (b) Behavior is predictable. (3) Prices and quantities are determined by the tendency of individuals and markets to move towards equilibrium. (4) Efficiency is important. In the Wealth of Nations , Adam Smith’s saw a system in which the pursuit of self-interest furthered the general goals of society. Basic Approach of Microeconomic Analysis • A hallmark is the use of
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Unformatted text preview: models to analyze issues. Models are abstract or stylized characterizations of the real world that are not meant to be realistic in literal sense of the term. Rather, models attempt to strip down complex reality to the bare essentials so that one can see the forest for the trees. Depending on what question is being asked, models can be of varying degrees of complexity, depending on what question is being asked. Often mathematics provides a helpful language for reasoning. But a model doesnt have to use math to be a model. Models are an essential precursor to attempts to make quantitative or empirical assessments of economic questions because they provide a framework for deciding: what to measure how to measure it Positive economic questions : Economic questions that can be answered by an appeal to the facts. Normative economic questions : Economic questions that concern what ought to be. Answers require value judgments....
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Introduction - models to analyze issues. Models are...

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