Microeconomics Chapter 1

rational people

do the best they can to achieve their objectives

When Economists Agree

A ceiling on rents reduces the quantity and quality of housing available. (93%) Tariffs and import quotas usually reduce general economic welfare. (93%) Flexible and floating exchange rates offer an effective international monetary arrangement. (90%) Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%) The United States should not restrict employers from outsourcing work to foreign countries. (90%)

marginal change

a small incremental adjustment to an existing plan of action

The disagreement between these economists is most likely due to differences in scientific judgments Correct .

There are two main reasons that economists tend to disagree: differences in values and differences in scientific judgments. In this case, the economists disagree due to differences in scientific judgments because they disagree about a factual matter: the type of tax policy that would lower the budget deficit. In contrast, disagreement due to differences in values reflect differing assessments on fairness or equity.

Adam Smith's phrase "invisible hand"

although participants in the market act with their own self-interest in mind, free markets can reach desirable outcomes without additional intervention under certain assumptions and market conditions

Economics

the study of how society manages its scarce resources.

opportunity cost

what you give up to get that item