Chapter 1 Flashcards
Economics is considered to be part of the ____ sciences.
Social
Define “Economics.”
Economics is the study of how individuals make choices to satisfy wants.
Define “Resources.”
Things that produce goods and services that satisfy people’s wants.
Define “wants.”
All of the items people would purchase if they had unlimited income.
What are the two types of economic analysis?
- Microeconomics
2. Macroeconomics
Define “Microeconomics.”
The study of decision-making at the level of individuals, households, and firms.
Define “macroeconomics.”
The study of economic phenomena on a national scale.
Examples include national inflation and unemployment.
Macroeconomics looks at the ________.
Totals or aggregates.
What new technology is being used to assist in macroeconomics study as well as micro?
Artificial Intelligence
State the three basic economic questions.
- What and how much will be produced?
- How will items be produced?
- For whom will the items will be produced for?
What answers the three basic economic questions?
The type of economic system used.
What are the main three types of economic systems?
- Centralized command and control
- The price system
- Mixed
State the “rationality assumption.”
Individuals do not intentionally make decisions that would leave them worse off.
Economics looks at what people ___, not what they ____.
Do
Think
People change their actions due to ____.
Changes in either incentives or self-interest.
True or False
Self-interest from an economic study standpoint, only includes the desire to accrue wealth over time.
False. Self-interest assumptions in economic models are not limited to wealth building.
What is the difference between an economic model and a physical model?
An economic model tests its validity based on what has already happened while a physical model is tested by repeated experiments.
True or False
To date, some physical models are complete but not all economic models are.
False.
No model, regardless of field is ever complete.
A model, by definition, is an _______.
Abstraction from reality.
State the Ceteris Paribus Assumption.
All things being equal… x = y… etc
True or False
Economics is considered an empirical science.
True
True or False
Economic models do not predict what people think, only how they make act with a given amount of resources.
True
True or False
Declared preferences will always match revealed preferences.
False.
Example: Netflix may plan to raise prices at a certain time. To gauge reaction, they will likely poll their users. Many will likely report that they will cancel service but in reality, few will.
What three criticisms of the rationality assumption do proponents of behavioral economics offer?
- Unblunded Selfishness
- Unbounded willpower
- Unbounded rationality
Rather than considering every available variable, behavioral economics stipulates that people often use ____ in place of complex analysis.
Heuristics (rules of thumb)
Define “Positive Economics.”
Economic analysis without regard to people’s feelings, morals, or belief systems.
Define “Normative Economics.”
Economic analysis that takes into account (whether intentionally or unintentionally) people’s feelings, morals, or belief systems.
True or False
An empirical study is concerned primarily with quality evidence and logic.
True
