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

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Unformatted text preview: 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 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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This note was uploaded on 04/09/2008 for the course ECO 102 taught by Professor Lindenfelser during the Spring '08 term at Community College of Allegheny County.

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

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