ECON 101 Study Guide - Midterm Guide: Marginal Utility, Marginal Cost, Opportunity Cost
Document Summary
You have unlimited wants but limited resources to fulfill them, requiring us to make tradeoffs. Scarcity: when unlimited wants exceed the limited resources to fulfill them. We face scarcity: we must make tradeoffs, every choice entails a cost, doing something means giving something else up. How do we optimally use our scarce resources. Economic model: simplified version of reality used to analyze real-world economic situations. Market: a group of buyers and sellers of a good and the arrangement by which they come together to trade. We use economic models of markets to study how people make tradeoffs to deal with the problem of scarcity. Opportunity cost: the highest-valued alternative given up to engage in an activity. We often express opportunity costs in dollars. Economics: the study of the choices people and firms make to attain their goals, given their scarce resources. Macroeconomics: study of economy as a whole, including topics such as inflation, unemployment, and economic growth.
