chapter 1 Flashcards
what is economics?
It’s about how people make choices that max out there satisfaction, given the fact that there wants are unlimited + resources are limited
describe the wants of consumers
unlimited
Repeated observation lets u create a ___________
hypothesis
Positive statement
- statements about “what is”
- Can be tested by checking it against facts
Normative statement
- Eg. “i think inflation is too high”
- Expresses opinion + cannot be tested
- statements about “what should be”
In a world characterized by scarcity ( people have to choose between different options)
people must make choices among alternatives.
The inescapable economic fact is that
there are unlimited wants and limited resources.
During the next hour John can choose one of the following three activities: playing basketball, watching television, or reading a book. The opportunity cost of reading a book
is the value of playing basketball if John prefers that to watching television.
Chanel has the option of purchasing one of three products: Brand A, Brand B, or Brand C. The price of each product is $10. If Chanel decides to purchase Brand A, the opportunity cost of this decision is
Brand B or Brand C, depending on which she considers to be the highest-valued alternative forgone.
If Gordon’s decision to attend Western University is a rational choice, then
for Gordon, attending Western University achieved the greatest benefit over cost.
When Costco opened a gas bar just off Highway 401, the neighbourhood was swamped with cars as drivers lined up to get a discount of 10 cents a litre.
The opportunity cost of a litre of gas includes
the time that you would have spent doing something other than lining up to buy a litre of gasoline.
When Costco opened a gas bar just off Highway 401, the neighbourhood was swamped with cars as drivers lined up to get a discount of 10 cents a litre.
To control the crowd Costco hires traffic police. When Costco hires traffic police, it faces a tradeoff that could include all of the following except
taking business away from gas stations in the area.
Statements about “what should be” are called
normative statements.
Statements about “what is” are called
positive statements.
“The rich should face higher income tax rates than the poor.” This is an example of
a normative statement.
The relationship between two variables that are positively related is shown graphically by a line that
slopes upward to the right.
The relationship between two variables that are negatively related is shown graphically by a line that
slopes downward to the right, b/c if the two variables are negatively related then if one of the variables inc the other dec
why do consumers need to make choices
bc they cant get everything they want
limited resouces of conusmers
income and time
Describe the relationship between scarcity, choices, and opportunity cost.
Scarcity leads to choices, and every choice made incurs an opportunity cost.
oppurtunity cost in descion making
every choice comes with an opportunity cost in decision-making, which means if your doing one thing your losing out on doing something else
give example of oppurtuniy cost
if u go to a lecture, it means ur not at home sleeping, that would be the opportunity cost of attending a lecture
a choice is a ___
tradeoff
cost is what u must …
give up to get seomthing
