Study Guide 1

Study Guide 1 - 1 Introduction to Economics (Ch. 1) 2...

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1 Introduction to Economics (Ch. 1) 2 Scarcity: People face trade-offs because resources are limited. 3 Benefit-Cost: Choosing one alternative over another generates both costs and benefits. 4 Marginal Analysis: Rational people make “how much” decisions at the margin. 5 Incentive: People make decisions by comparing costs and benefits; they respond to incentives. 6 Production Possibilities Frontier: A simple economic model to deepen understanding of some of the basic principles developed this week. 7 KEY TERMS: opportunity cost, marginal cost, marginal benefit, factors of production 1 Competitive Market Model, Demand and Supply (Ch. 2) 2 Market System: The free determination of prices and the free exchange of goods and services characterize a market economy; normally markets are a good way to organize economic activity. 3 Demand Schedule: Shows the quantity demanded at each price and is represented graphically by a demand curve. 4 Demand Curve Shifts: A change in quantity demanded at any given price will cause the demand curve to either shift rightward or leftward. This is called either an increase or a decrease in demand. 5 Demand Shifters: Events or variables that cause the demand curve to shift. 6 Supply Schedule: Shows the quantity supplied at each price and is represented graphically by a supply curve. 7
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Study Guide 1 - 1 Introduction to Economics (Ch. 1) 2...

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