Economics chapter 1
what is the economic surplus of a plane ticket that cost $250 but you buy it online for $175
$75
the study of how people make choices under the conditions of scarcity and the results of those choices
Economics
the concentration on the performance of national economies and ways to improve upon their performance
Macro vs. Micro
focuses on choice made by individuals or groups in the context of individual markets
Micro vs. Macro
choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is an example of
applying the cost benefit principle
diving the total cost of n units of an activity by n reveals the
average cost
what is the logical implications of the scarcity principle
choices are made
extra cost and benefits of an activity are more important considerations than the total costs and benefits.
cost benefit principle
an action should be taken if the extra benefit is greater than or equal too the extra cost
cost-benefit principle
economic models are intended to generalize about patterns in
decision-making
someone who applies economic insights to everyday life
economic naturalist
the difference between the benefit gained and the cost incurred of taking an action
economic surplus
who does the scarcity principle apply too
everyone-consumers, firms, government, and nations
states that a person is more likely to do something if the benefit of doing that increases
incentive peinciple
the extra that results from an extra unit of an activity is called
marginal cost
why is the cost benefit model used by economist
most people follow it all the time
tell us how people should make the economic decisions
normative principles
what does rational decision making require
one to choose the actions that yield the largest economic surplus
opportunity cost is not the total value of all possible activities but....
only the value of the alternative you give up
what is an activity is the value of the next best thing alternative forgone
opportunity cost
tell us how people actually make the economic decisions
positive principles
is the government wanted to use the incentive principle to discourage people from smoking what would they do
raise the price in cigarettes along with the price of them
that with limited resources, having more of "this" means having less of "that"
scarcity principle
implies that a person cannot have or do anything, but must choose from among alternatives
scarcity principle implies....
dean decided to play golf rather than prepare for tomorrows exam in economics. what can you infer?
that the economic surplus from playing golf exceeded the surplus from studying
when a person decides to pursue an activity as long as the extra benefits is greater than or equal to the extra cost, that person is following
the cost benefit principle
what is the extra benefit that comes from an extra unit of activity is called
the marginal benefit of the activity
whether studying size of the US economy or the number of children a couple will choose to have is the concept that
wants are unlimited and resources are limited and a choice must be made