Chapter 1 Reading Flashcards
What is the definition of Economics? (What it studies?)
Economics studies how individuals, firms, and societies make decisions to maximize their well-being given limitations
What are incentives?
Factors that motivate people and firms to make decisions in their best interest,
Eg. tough admissions requirements for graduate school provide an incentive for students to study harder in college.
What is scarcity?
Having too many wants but not enough resources to achieve them all.
What are microeconomics?
Microeconomics deals with deasion-making by individuals, businesses, and industries. it concerns what items a business should produce, what price it should charge, and if the business should be left alone or for it to be regulated
Microeconomics looks at how markets are “structured,” what does this mean?
Some markets are competitive where many firms offer similar products. Other markets have only one or two large firms. What decisions do businesses make under different market structures?
What are macroeconomics?
Macroeconomics focuses on the broader issues we face Asa nation.
Examples: inflation, unemployment, economic growth etc.
What does it mean when economic models use a “stylized” approach to evaluate a problem or issue
Economists simplify information and facts to their relevancy, and use assumptions to develop a model to analyze the issue.
What is the most important model in this course?
Supply and demand
Models aim to identify relationships between ___________ in order to explain and predict why __________ occur
Variables, events
In model building, the importance of keeping other factors constant is called what?
Eg. to determine how many movies you would be willing to download from Google play in any given month we would hold your monthly income constant
Ceteris Paribus
What are the three ways to measure efficiency?
Production efficiency, allocative efficiency, And Pareto efficiency
What is production efficiency?
When goods are produced at the lowest cost
What is allocative efficiency?
When individuals who desire product the most obtained those goods and services (all goods and services meet the needs and wants of society)
What is Pareto efficiency
When society improves the wellbeing of as many individuals as possible (maximum level of efficiency) without making anyone worse off
What is equity in economics?
The fairness of various issues and policies
