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Chapter 1 Key Concepts
Terms in this set (12)
Study of allocation of scarce resources to unlimited wants.
Economic Resources of Production
Land, labor, and capital
Microeconomics vs. Macroeconomics
Microe deals with decisions by firms, individuals as Well as single product markets.
Macro deals with the economy as a whole and explores economy wide issues like unemployment, inflation, and GDP interest rates.
Types of Economic Production
Command, Market, Tradition, and Mixed.
Production decisions made by a central authority(government) deciding what and how to produce. Ex. roads, military, or pubic schools.
Production decisions are done by many buyers and sellers exchanging goods and services solely for their own personal benefits. Ex. Goceries, clothing, and cars.
Production decisions are made as the result of historical circumstances. Ex. Parents don't have to take care of children to profit, they do it because its tradition.
Mixed Economic Systems
All economies around the world throughout history have market, command and traditional components.
Marginal Decisions Making
Rationality implies that individuals make decisions based upon the extra unit. The water diamond paradox example can help to understand this concept.
Simplifications of ideas used to better understand economic topics/
A Positive Statement
An observation that may be hypothetically tested and is measurable.
A Normative Statement
An observation of value which cannot be tested and measured.
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