modul 1 Flashcards
How does opportunity cost impact decision-making?
Opportunity cost requires us to give up one alternative in order to choose another. It forces us to consider the value of alternative uses in decision-making.
What are the three fundamental economic questions?
What should be produced? How should goods and services be produced? For whom should goods and services be produced?
What is the definition of economics?
The study of human decision making.
Every choice has an opportunity cost and opportunity costs affect the choices ______ make.
People
What is scarcity?
Having limited resources
How does scarcity relate to choice?
Scarcity forces us to make choices
______ is the concept that every society must decide what it will produce with its scarce resources.
Scarcity
Opportunity cost is the ______ of one alternative requires that another be given up.
choice
What is the concept of scarcity?
The idea that resources are limited
What is the impact of opportunity cost on decision-making?
It helps in making better decisions
What is scarcity and how does it relate to economics?
Scarcity is the condition of having to choose among alternatives. It relates to economics because our limited resources force us to make choices.
What is opportunity cost?
The cost of making choices.
What is the definition of opportunity cost?
The value of the best alternative forgone in making a choice
What is the relationship between scarcity and opportunity cost?
Opportunity cost is the result of scarcity
What is economics?
The study of how people make choices.
What distinguishes economics from other fields?
The assumption that individuals make choices to maximize the value of some objective
What distinguishes economics from other social sciences?
Economists study choices that scarcity requires us to make.
What is the branch of economics that focuses on the impact of choices on the total, or aggregate, level of economic activity?
Macroeconomics
Individuals maximize by deciding whether to do a little more or a little less of ______.
something
What is the concept that individuals make choices at the margin?
Opportunity costs
How does opportunity cost play a role in economic choices?
Opportunity cost refers to the value of the next best alternative that is forgone when making a choice. It influences the choices individuals make as the set of available alternatives changes.
How do opportunity costs influence economic choices?
Opportunity costs refer to the value of the next best alternative that is given up when making a choice. Economic choices involve weighing the benefits and costs of different options.
What is the role of opportunity costs in economic choices?
Opportunity costs affect the choices individuals make.
What assumption do individuals make when making choices?
Individuals make choices to maximize the value of some objective
What do economists assume about consumers’ behavior?
They pursue self-interest
What does it mean for individuals to make choices to maximize the value of some objective?
Individuals make decisions based on what they believe will bring them the most satisfaction or benefit. They weigh the costs and benefits of different options to choose the one that maximizes their desired outcome.
What do economists assume about individuals’ objectives?
They serve their own self-interest
Economists argue that an understanding of ______ is crucial to the examination of choices.
opportunity cost
How do opportunity costs play a role in economic choices?
Opportunity costs affect the choices individuals make, as the expected benefits of alternatives influence decision-making.
What do economists focus on when analyzing choices?
Economists focus on the consequences of small changes in choices.
What do economists assume about individuals’ choices?
Individuals make choices to maximize the value of some objective.
Microeconomics focuses on the choices made by ______ in the economy.
individual decision-making units
What is the distinction between pursuing self-interest and being selfish?
Pursuing self-interest means pursuing the things that give one satisfaction.
What is the distinguishing characteristic of the economic way of thinking?
Attention to markets
What is the branch of economics that focuses on the choices made by individual decision-making units in the economy?
Microeconomics
The elements of opportunity cost, maximization, and choices at the margin can be found in each of two broad areas of economic analysis: __ and macroeconomics.
microeconomics
Choices in water consumption, like virtually all choices, are made at the __.
margin
What is the difference between microeconomics and macroeconomics?
Microeconomics focuses on individual economic units, while macroeconomics examines the economy as a whole.
What is the relationship between changes in the set of alternatives and individual and firm choices?
Individuals and firms choose the alternative that maximizes their satisfaction or profits.
What is the fallacy of false cause in testing economic hypotheses?
A problem that occurs when economists incorrectly assume causation based on correlation
What is the term used to describe the problem of testing economic hypotheses while assuming all other factors remain constant?
Ceteris paribus
What are the characteristics of economics as a social science?
Microeconomics focuses on individual economic units, while macroeconomics examines the economy as a whole.
Scientists cannot prove a hypothesis to be true; they can only fail to prove it ______.
false
What is a set of simplifying assumptions about some aspect of the real world called?
a model
What is a hypothesis?
A relationship between two or more variables
What is a normative statement?
A statement that makes a value judgment
Economists try to employ the ______ method in their research.
scientific
What is a hypothesis that has not been rejected after widespread testing and that wins general acceptance commonly called?
a theory
What is the fallacy of false cause?
The incorrect conclusion that one event causes another because the two events tend to occur together
Economists test hypotheses by ___
collecting and analyzing data
What is the impact of the fallacy of false cause on testing economic hypotheses?
It limits the ability to perform controlled experiments
What is the difference between normative and positive statements?
Normative statements make value judgments and cannot be proven true or false, while positive statements can be tested and proven true or false.
What is the scientific method?
A process of testing hypotheses through observation and experimentation.
What is the purpose of special statistical tests used by economists?
To determine whether changes in one thing actually do cause changes observed in another
What is the impact of the all-other-things unchanged (ceteris paribus) problem on testing economic hypotheses?
The all-other-things unchanged problem refers to the difficulty of isolating the impact of a single variable on an outcome, as there are often multiple factors at play. This makes it challenging to test economic hypotheses.
Can you distinguish between a normative and a positive statement?
Yes, a normative statement expresses an opinion or value judgment, while a positive statement is a statement of fact that can be tested and proven true or false. For example, ‘The unemployment rate is 5%.’ is a positive statement, while ‘The government should provide free healthcare for all citizens.’ is a normative statement.
What is the economists’ laboratory?
The real world
What is the all-other-things-unchanged problem in testing economic hypotheses?
A problem that occurs when economists cannot control for all variables except the one being tested
What is the process of testing and modifying hypotheses called?
testing
How do economists test hypotheses?
Through statistical tests
Can normative statements be proven true or false? Provide an example.
No, normative statements are value judgments and cannot be proven true or false. For example, the statement ‘We should increase taxes on the wealthy’ is a normative statement.
If a test reveals that a particular hypothesis is false, then the hypothesis is ______ or modified
rejected
What is the difference between a variable and a constant?
A variable can change, while a constant cannot
An increase in the price of gasoline will reduce the quantity consumers demand, ______.
ceteris paribus
What is the fallacy of false cause and its impact on testing economic hypotheses?
It assumes a cause-and-effect relationship without evidence
What is the purpose of testing a hypothesis?
to prove it true
