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Terms in this set (30)
the social science that studies how people make decisions in the face of scarcity and the resulting impact of such decisions on both society as a whole and the individual members therein.
a universal phenomenon that arises because resources are limited.
the recognition that in many situations acquiring more of one thing can often only be done at the expense of getting by with less of something else.
the study of how individual decision maker behave and interact with each other, often with a focus on how households and firms behave and interact with each other in markets.
the study of the functioning and performance of a society's economy as a whole, often with a focus on levels of and changes in aggregate measures such as the inflation rate, unemployment rate, and gross domestic product growth rate
a statement that aims to describe how the world actually is or actually functions.
a statement that aims to assess the desirability of how the world is or functions, perhaps with suggestions of things that could be done to improve matters.
the gains that a person realizes from taking an action.
the burdens that a person incurs from taking an action.
total economic surplus
the difference between total benefits and total costs.
a guide to decision-making which states that an individual should undertake an activity if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so.
the change in the value of total benefits as more of an activity is undertaken.
the change in the value of total costs as more of an activity is undertaken.
a summary of how behavior of a rational decision maker will change as costs or benefits change: (i) if the marginal benefit of an activity increases, then a rational person will engage in more of the activity, whereas (ii) if the marginal cost of an activity increases, then a rational person will engage in less of the activity.
someone who makes his own personal assessment of the benefits and costs associated with different outcomes, and who subsequently uses these measures as the basis for decision making.
In 2015 High School graduates earned $11,037 per year more than non-High School graduates. If this difference had instead been $8,500 per year, then we would expect
more people to dropout of school before graduating High School
Consider the following two statements. Statement 1: "The U.S. should restrict employers from outsourcing work to foreign countries." Statement 2: "A ceiling on rents reduces the quantity and quality of available housing." Most economists would
agree with Statement 2, but disagree with Statement 1.
the social science that studies decision making in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein
In July 2012 professional golfer Adam Scott bogeyed the last four holes of the British Open to lose the tournament to Ernie Els by one stroke. Around the same time flooding in Beijing, China resulted in the death of at least 77 people. If Adam was more upset about the outcome of the British Open than about the loss of life from the flooding in Beijing, then it would seemingly suggest that he
is a self-interested individual.
John recently saw the comedian Ron White perform at the Topeka Performing Arts Center in Topeka, KS. His Total Benefits from seeing this show were $120, while his Total Costs were $70. From this information, it follows that his Economic Surplus
from attending the show was ($120)-($70) = ($50).
Normative statements are
are supported (either implicitly or explicitly) by the priorities, goals, and value judgments of the person making the statement.
A "Rational Decision Maker" should
take an action if and only if the Marginal Benefit of the action is at least as great as the Marginal Cost of the action.
The Cost-Benefit Principle states that
a person should take an action if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so.
Mike Ditka's suggestion that football related injuries could likely be reduced by have participants play without helmets (or at least without facemasks on their helmets)
relies heavily upon the Incentive Principle.
Andrea has $75 to spend and wants to purchase either a new amplifier for her guitar or a new MP3 player. Each good costs exactly $75, so she can only purchase one of the two items. This scenario illustrates the basic concept that
people face tradeoffs
Armen Alchain and Gordon Tullock
argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car.
Paula enjoys going to the movies. In July she saw 8 movies in the theatre. Her Marginal Benefit of the 8th movie was $16, while her Marginal Cost of the 8th movie was $12. Based upon this information alone, her Economic Surplus
would have been smaller if she had instead gone to the movies 7 times.
____________ is the branch of economics which studies how individual decision-makers behave and interact with each other, often with a focus on how households and firms behave and interact with each other in markets.
A "Self-Interested" person
cares about his own well-being more than the well-being of others.
When considering potential government policies, it is important to recognize that
if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy.
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