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incentives

rewards for engaging in particular study

economics

the study of how people allocate their limited resources to satisfy their unlimited wants

resources

things used to produce goods and services to satisfy people's wants

wants

what people would buy if their incomes were unlimited

microeconomics

the study of decision making undertaken by individuals (or households) and by firms

macroeconomics

the study of the behavior of the economy as a whole, including such economywide phenomena as changes in unemployment, the general price level, and national income

aggregates

total amounts or quantities; aggregate demand, for example, is total planned expenditures throughout a nation

economic system

a society's institutional mechanism for determining the way in which scarce resources are used to satisfy humans desires

rationality assumption

the assumption that people do not intentionally make decisions that would leave them worse off

models, or theories

simplified representations of the real world used as the basis for predictions or explanations

ceteris paribus assumption

the assumption that nothing changes except the factor or factors being studied

empirical

relying on real-world data in evaluating the usefulness of a model

behavioral economics

an approach to the study of consumer behavior that emphasizes psychological limitations and complications that potentially interfere with rational decision making

bounded rationality

the hypothesis that people are nearby, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them

positive economics

analysis that is strictly limited to making either purely descriptive statements or specific predictions; for example, "If A, then B" A statement of what is

normative economics

analysis involving value judgements about economic policies; relates to whether outcomes are good or bad. A statement of what ought to be.

economic way of thinking

the approach to improved decision making advocated by economists

yes

myra decides to study an extra hour for her test to pass it.. based on rationality assumption or not

no

coin toss. rationality assumption or not

yes

deciding to buy a cd if you work over 2 hours. rationality assumption or not

rational, incentives

economics assumes people are _______ and respond to different ________

bounded rationality

individuals make short run choices that are non consistent with their long-term goals

the individual decides against health care as it may make him better off

does not apply to the economic way of thinking with issues in health care.

congress passes a huge appropriations bill leading to increased government spending

a reduction of income tax rates will result in more people working: one thing that might change thus offset the outcome stated

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