Econ Chapter 1

Economists assume that people are rational in the sense that
They use all available information as they take actions intended to achieve their goals
Which of the following best describes Scarcity
unlimited wants exceed the limited resources available
scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost
Scarcity
Quantity demanded > Quantity Supplied
-Economic problem is scarcity, all economies face it
Rationality
Marginal benefit > Marginal cost
Trade off
efficiency (getting the most out of given recourses vs. equity (fairness)
-Giving up something to get something else
Opportunity Cost
– money and time cost of next best alternative
Centrally planned economy
Government decides
Market economy
consumers/producers decide
Mixed economy
– Consumers/producers and government decides
AHDRR
Assume, hypothesis, data, revise, retain
Normative Analysis
what should be (suggestion, opinion)
Positive Analysis
What is (fact)
Microeconomics
how one household makes business choices?
Macroeconomics
how the US makes choices
Capital
manufactured goods that are used to produce other goods and services
Product efficiency means that
a good or service is produced at the lowest possible cost
allocated efficiency means that
every good or service is produced up to the point where marginal benefit is equal to marginal costs
What best describes scarcity
unlimited wants exceed the limited resources available
Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost
equity is
the fair distribution of economic benefits
Economists use the word marginals to mean an extra of additional benefit of cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost
Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influences their choices
Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
one, what good and services will produced? two, how will goods and services be produces, and three who will receive the goods and services produced.

Get access to
knowledge base

MOney Back
Guarantee
No Hidden
Charges
Unlimited
Knowledge base
Become a Member
Haven't found the Essay You Want? Get your custom essay sample For Only $13.90/page