Marcoeconomics
Assumptions for decisions making
1) self interest 2) marginal decision making 3)
MB >= MC
Do it! (do more.)
....is the study of how individuals and societies allocate scarce resources among many competition uses and how this decision- making affects the economy at large
Economics
Is the study of how individuals and institutions make decision in a world of scarce resources
Economics
Self-Interest
The idea that people choose to do the things that interest them
Because the world is characterized by scarcity - people must choose between different uses for the resources at their disposal. In economics - we refer to this as:
allocating resources
MB < MC
dont do it! do less
Someone who is self interested only performs actions for his or her own benefit and not for the benefit of others
false
Marginal Decision Making
i. The process of making choices in increments by evaluating the additional, or marginal, benefit against the additional, or marginal cost of an action
The additional benefit associated with one more unit of an activity is the ----- benefit
marginal
An economy is better off when it stops producing output at the point where:
marginal benefit = marginal cost
An economy should continue producing a good or service so long as
marginal benefit exceeds marginal cost
optimal level of the activity
marginal benefit of an activity equals marginal cost = equilibrium and optimal level of the activity
The additional cost associated with one more unit of an activity is the
marginal cost
When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying - you are engaging in:
marginal decision making
when you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bills
marginal decision making
When the marginal benefit equals the marginal cost - that stable level is referred to as an
optimal level
optimization
ppl make choices to maximize overall benefit or utility
Self interest, marginal decisions, and optimization all form the basis of
rational decision making
Self-interest - marginal decision making - and optimization form the basis for
rational decision making
Drinkable water is ____ water in general
relatively more scarce
Because the world is characterized by scarcity - people must allocate the limited _______ at their disposal among many competing uses
resources
Since Chevrolet Camaros represent a small subset of all automobiles in existence - they are relatively more:
scarce than automobiles in general
Opportunity costs exists because of ....
scarcity
means that resources are limited
scarcity
The idea that people choose to do things that interest them is
self-interest
marginal benefits
the additional benefit associated with 1 more unit of an activity
marginal cost is
the additional cost associated with one more unit of an activity
marginal cost
the cost of producing one more unit of a good
The optimal level of economics activity occurs when
the marginal benefit equals the marginal cost
There is no incentive to either increase or decrease the level of the activity performed when
the marginal benefit equals the marginal cost
The marginal benefit of an activity can be founded by calculating the change in
the total benefits as the level of the activity increases by one unit
Opportunity Cost
the value of the next best forgone alternative; the value of the opportunity that you gave up when you chose one activity, or opportunity, instead of another.
recognize that economics is relaly about how ppl make choices in the world of scarcity
true
