Econ Ch1
Theory
Hypothesis that has not been rejected after testing
Water is considered a scarce good rather than a free good because
It has alternative uses
What happens is hypothesis is false?
It is either rejected or modified.
Examples of scarce goods
Land, oil, water, air, etc-limited natural resources
Identify examples of microeconomics and macroeconomics: How the government responded to the recent recession
Macroeconomics
Identify examples of microeconomics and macroeconomics: Last month's U.S. inflation rate
Macroeconomics
Identify examples of microeconomics and macroeconomics: Sales volumes of Walmart stores
Microeconomics
Identify examples of microeconomics and macroeconomics: The rising prices of textbooks
Microeconomics
Identify normative or positive statements: "Everyone in the country should be covered by national health insurance."
Normative Statement
Identify normative or positive statements: "The current rate of unemployment of 5 percent is too high."
Normative Statement
Variable
Something who's value can change (ex: speed of car)
Constant
Something who's value stays the same (ex: min in an hr)
Fallacy of false cause
The incorrect assumption that one event causes another because the two events tend to occur together.
Independent variable
Variable that induces change
dependent variable
Variable that responds to change
Three questions every economy must determine
What should be produced? How it should be produced? For whom it should be produced?
Positive statement
a statement of fact or a hypothesis
Law
a theory that has been proven to be true in many tests. (universal acceptance)
Hypothesis
assertion of a relationship between 2 or more variables that could be proven false
Economics models are
built using relevant observations, assumptions, and abstractions.
Choice at the margin
is a decision to do a little less of something (ex. individuals don't make choices to drink water, they choose to consume more or less water.)
The economic way of thinking deals with
making choices by comparing marginal costs and marginal benefits.
Scarce good
one for which the choice of one alternative use of the good requires that another be given up
Free good
one for which the choice of one use does not require that we give up another (ex: Gravity)
Normative Statement
one that makes a value judgement
Macroeconomics deals with
the analysis of the aggregate values in the economy.
Scarcity is a situation in which
the available resources are not enough to satisfy the wants of the people.
Microeconomics
the branch of economics that focuses on the choices made by individual decision making units in the economy (INDIVIDUAL MARKETS)
Ceteris Paribus
A Latin phrase that means, "all other things unchanged."
Model
A set of simplifying assumptions about some aspect of the real world.
Macroeconomics
Branch of economics that focuses on the impact of choices on the total or aggregate, level of economic activity.
The Margin
Current level of an activity. Most choices are made at the ____.
Identify normative or positive statements: "A high rate of economic growth creates more jobs."
Positive Statement
Identify normative or positive statements: "Smokers are more likely to be extraverts than nonsmokers."
Postitive Statement
The problem of determining what goods and services society should produce exists because
Resources are scarce
Selecting among alternatives involve 3 ideas:
Scarcity, Choice, Opportunity cost
Economics
Social science that examines how people choose among the alternitaves available to them
Scientific Method
Systematic set of procedures through which knowledge is obtained
Scarcity
The condition of having to choose among alternatives
Which of the following is an example of a positive statement?
The rate of unemployment is 4 percent.
Opportunity cost
The value of the next best alternative forgone in making any choice (ex: college vs university, time spent on one thing)
Suppose you observe that the sun rises every morning at the six o'clock business report. If you conclude that the six o'clock business report makes the sun rise, you are committing the fallacy of
false cause.