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.