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study of how individuals make choices about how to allocate and distribute scare resources and how they interact with each other


inescapable because resources are limited and human desires are insatiable

opportunity cost

what we chose is what we must give up by making that choice

economic models

to understand economic analysis to describe economic phenomena and make predictions about what will happen under particular circumstances`


makes everyone involved better off


compare benefits and opportunity costs of each action that yields the greatest net benefit

positive economics

describe economic phenomena and make predictions about what will happen under particular circumstances

normative economics

to evaluate the merits of different situations

pareto efficiency

only way anyone can be made better off is by reducing the well-being of one or more other people


The study of the economic behavior and decision making of small units, such as individuals, families, and businesses.


the branch of economics that studies the overall working of a national economy

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