ch1 economics notes - Chapter 1 Limits Alternatives and...

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Chapter 1 Limits, Alternatives,  and Choices wants are numerous and varied wants exceed resources economics:  how society makes the best choices under conditions of scarcity Economic Perspective this is the economic way of thinking opportunity cost:  to obtain more of one thing society forgoes the opportunity  of getting the next best thing Purposeful Behavior human behavior reflects “personal self-interest” utility:  satisfaction from consumption o decisions are purposeful not random, not always the best Marginal Analysis marginal analysis:  comparisons of marginal benefits and marginal costs,  usually for decision making marginal = extra, additional, change in Theories, Principles, and Models scientific method:  observations of behavior / outcomes, hypothesis, test  hypothesis, verdict on hypothesis, continuing to test hypothesis, aggregate  facts economic principle:  a statement about economic behavior theories, principals, and models are “purposeful simplifications” generalizations:  economic principles are generalizations relating to  economic behavior other things equal assumption:  factors other than those being considered  do not change graphical expressions:  models are expressed graphically
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Macroeconomics and Microeconomics macroeconomics:  examines economy as a whole o aggregate:  collection of specific economic units treated as if they were  1 unit (ex. Consumers) microeconomics:  concerned with individual units unemployment is both a macro and micro issue (macro   unemployment  relates to aggregate production; micro  individual worker decisions positive economics:  focuses on facts and cause and effect relationships o scientific based analysis normative economics:  incorporates value judgments; looks at the  desirability of certain aspects of the economy positive  what is; norm  what ought to be
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