Economics Chapter one

A market is a group of _______ of a good or service and the institution or arrangement by which they come together to trade.

Buyers and sellers

To develop a model that will answer economic questions, economists typically:

First make simplifying assumptions, then formulate a hypothesis, test the hypothesis, and finally revise the model if necessary.

What goods and services will be produced, how the goods and services will be produced, and who will receive the goods and services are determined:

In centrally planned economies by the government, and market economics by the decisions of households and firms interacting in a market.

economic models are:

Simplified versions of reality designed to analyze "what is" to explain human decision making in any context

Equity is

The fair distribution of economic benefits

_________ decide(s) what goods and services will be produced.

consumers, firms, and government

microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.

int he Untied States, who receives the good and services produced depends largely on

how income is distributed.

A (hypothesis) in an economic model is

A statement that may be either correct or incorrect about an economic variable, tested before it can be accepted ( or not rejected) , usually about a causal relationship.

Economics assumes people and firms:

Are Rational, respond to incentives, and make all-or-nothing decisions.

societies organizer their economies in two main ways to answer the three questions of what,how, and who. A society can have a _______economy in which the government decides how economic resources will be allocated. or a society can have a ________ economy in which the sessions of household and firms interaction in markets allocate economic resources.

Centrally Planned Market

how do market economies ultimately determine what gods and services are produced, how the foods and services will be produced, and who will receive the goods and services?

Consumers determine what goods and services are produced, firms determine how to produce them, and markets determine who will receive them.

Suppose Dell is currently selling 3,000,000 computers per year. However, managers at Dell are considering whether to increase production by 300,000 computers. one manager explains that after increasing production by this amount, total profit would be $100 million. Given this information, should Dell increase production by 300,000 computers?

Information about the additional revenue earned and the additional cost incurred from production 300,00 additional computers is required to answer this question.

Economics is a social science because

It is based on the study of actions of individuals, it considers human behavior-particularly decision-making behavior, it apples the scientific method to the study of the interactions among individuals.

firms choose how to produce the goods and services they sell. in many cases, firms face a trade-off between using more workers or using more machines. For example,

Many time in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in china that use more workers and fewer machines.

Economists use the word (marginal) to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

Marginal Benefit equals marginal cost

A ______ economy is a economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role the allocation of resources

Mixed

____ is concerned with what is , and ________ is concerned with what ought to be. Economic is about _____ , which measures the cost and benefits of different courses of action

Positive analysis, normative analysis, positive analysis

______ occurs when a good or service is produced at the lowest possible cost. _____ occurs when production is in accordance with consumer preferences.

Productive efficiency Allocation effciency

one of the basic facts of life is that people much make choices as they try to attain their goals. this unavoidable fact come from a reality an economist calls

Scarcity.

when the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,

The policies are consistent with economic incentives

economics is the study of ...

The study of the choices people make to attain their goals, given their scarce resources

Microsoft charges a price of $599 for a copy of windows 7. Is this pricing decision rational.

When we assume that managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.

A portion of microeconomics evamines

how individual firms make choices, such as how they decide what price to charge.

what covers the study of topics such as inflation or unemployment

macroeconomics

Any model is based on making assumptions because

models have to be simplified to be useful, we cannot analyze an economic issue unless we reduce its complexity

trade-offs force society to make choices, particularly when answering the following three fundamental questions:

one, what food and services will be produced? Two, how will the good and services be produced? Three, who will receive the goods and services produced?

Macroeconomics examines

the economy as a whole, such as how rapidly the economy grows

opportunity cost is

the highest valued alternative that must be give up to engage in a activity.

macroeconomics is

the study of economy as a whole, including topics such as inflation, unemployment, and economic growth.