principles and practice of economics Flashcards
economics
study of people’s choices
economic agent
group or individual that makes choices
scarcity leads to
allocation of limited resources
positive economics
what people actually do
objective statements
normative economics
what people ought to do
subjective judgments
normative econ: prescriptive economics
economic analysis to help individual economic agents choose what is in their best personal interest
normative econ. and public policy
advise society in general
evaluate public policies
micro vs macro
agents control over the micro
agent don’t have control, they react (overall)
principles of economics
optimization
equilibrium
empiricism
optimization
making the best feasible choice possible with the given info, knowledge, experience, etc.
people make choices motivated by calculations of benefits and costs
optimization: trade-offs
benefits must be given up to gain others
optimization: budget constraints
set of things that a person can choose to do or buy without breaking their budget
optimization: opportunity cost
what you give up/ the value of the next best alternative
optimization: cost-benefit analysis
a calculation that identifies the best alternative (net benefit) by summing benefits and subcontracting costs
optimization: is facebook free
opportunity cost of time
