Microeconomics- Economic Thinking

How do economists use economic models?

- an economic model is a simplified version of reality that allows us to observe, understand, and make predictions about economic behavior - purpose is to take a complex, real world situation and pare it down to the essentials

Why is economics important?

-allows for analysis of human behavior -predicts how individuals, consumers, and businesses will behave

What do economists make a lot of and why?

-assumptions -assumptions can simplify a complex problem and make it easier to understand -"all other things equal" = all other relevant factors remain unchanged; tunnel vision

Why does scarcity exist?

-because of resources, or factors of production, which include Land, labor, Capital (things that can be manufactured, NOT MONEY!), and Entrepreneurship -resources exist in limited supply

What is microeconomics?

-focuses on the actions of individual agents within the economy, such as households, workers, and businesses

What is economics?

-study of incentive and scarcity -how people get what they want/ need when others want/need the same thing -study of how humans make choices under the conditions of scarcity

What does a basic math equation in economics encompass?

-the variable on the left side is what is being explained ("the effect") -on the right hand side is what is doing the explaining (" the causes")

What is scarcity?

Limited quantities of resources to meet unlimited wants