how people make choices
Economics is the study of what?
to learn a way of thinking, to understand society, to understand global affairs, to be an informed voter
What are the 4 main reasons to study economics?
costs that cannot be avoided, regardless of what is done in the future, because they have already incurred
What are sunk costs?
a market in which profit opportunities are eliminated almost instantaneously
What is an efficient market?
behavior of individual decision-making units (firms, households)
What does microeconomics focus on?
behavior of aggregates (income, employment) on a national scale
What does macroeconomics focus on?
What two kinds of questions does economics ask and attempt to answer?
seeks to understand behavior and operation of systems without making judgments. it describes what exists and how it works
What is positive economics?
analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action
What is normative economics?
What is another name for normative economics?
descriptive economics, economic theory
What are the divisions of positive economics?
compilation of data that describe phenomena and facts
What is descriptive economics?
a statement of set of related statements about cause and effect, action and reaction
What is economic theory?
a model is a formal statement of a theory, and is usually a mathematical statement of a relationship b/w 2 or more variables
What is the difference between a model and a theory?
the principle that irrelevant detail should be cut away
What is Ockham's razor?
belief that what is true for a part is necessarily true for the whole
What is the fallacy of composition?
the collection and use of data to test economic theories
What is empirical economics?
efficiency, equity, growth, stability
What are four criteria for judging economic outcomes?
one that produces what people want at the least possible cost
What does it mean to be an efficient economy?
when national output is growing steadily, with low inflation and full employment
What does economic stability refer to?