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the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided
Economics
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itis a behavioral, or social, science. in large measure it is the study of how people make choices. the choices that people make, when added up, translate into societal choices
Economics
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The three fundamental concepts
- Opportunity cost
- Marginalism
- Efficient markets
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the best alternative that we forgo, or give up, when we make a choice or decision.
opportunity cost
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the process of analyzing the additional or incremental costs or benefits arising from a choice or decision
Marginalism
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costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.
Sunk Costs
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a market in which profit opportunities are eliminated almost instantaneously
efficient market
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it teaches us a way of thinking and helps us make decisions
the study of economics
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the period in england during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.
Industrial Revolution
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is an essential part of the study of society
the study of economics
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is essential to an understanding of global affairs
An understanding of economics
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To be an___________a knowledge of economics is essential.
- Informed Citizen
- when we participate in the political process, we are voting on issues that require basic understanding of economics.
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looks at the individual unit - the household, the firm, the industry. it sees and examines the "trees."
microeconomics
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looks at the whole, the aggregate. it sees and analyzes the "forest"
macroeconomics
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an approach to economics that seeks to understand bahvior and the operation of system without making judgements. it describes what exists and how it works
Positive economics
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An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. also called policy economics
normative economics
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the compilation of data that describe phenomena and facts
Descriptive Economics
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A statement or set of realted statements about cause and effect, action and reaction
Economic Theory
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A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables
Model
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A measure that can change from time to time or from observation to observation
Variable
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The principle that irrelevant detail should be cut away
Ockham's razor
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a device used to analyze the relationship between two variables while values of other variables are held unchanges
- Ceteris Paribus, or all else equal
- using the device of ceteris paribus is one part of the process of abstraction. in formulating economic theory, the concept helps us simplify reality to focus on the relationships that interest us.
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the most common method of expressing the quantatative relationship between two variables is.....
graphing that relationship on a two-dimentional plane.
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the erroneous belief that what is true for a part is neccessarily true for the whole
fallacy of composition
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the collection and use of data to test economic theories
empirical economics
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Criteria for judging economic outcomes
1. Efficiency
2. Equity
3. Growth
4. Stability
Economic Policy
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Economic Policy
producing what people want at the least possible cost
1)Efficiency
2)Equity
3)Growth
4)Stability
Efficiency
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Economic Policy
Fairness
1)Efficiency
2)Equity
3)Growth
4)Stability
Equity
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Economic Policy
an increase in the total output of an economy
1)Efficiency
2)Equity
3)Growth
4)Stability
Growth
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Economic Policy
A condition in which national output is growing steadily, with low inflation and full employment of resources.
1)Efficiency
2)Equity
3)Growth
4)Stability
Stability
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