[ECON 2Q03] - Final Exam Guide - Ultimate 29 pages long Study Guide!
29 Nov 2016
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Economics is the study of how people make decisions when faced with constraints, and what happens when those people interact with each other. Economic models are a simplification of reality. Usually include the variables we are studying, assumptions, equations or diagrams that show how variables interact with one another. First and foremost=taking a methodical approach to thinking about problems. Marginal analysis: once something has happened, you cannot go back in time and change it. Past does not influence decisions about future events. To think at the margin, you compare the marginal benefit to marginal cost for any decision: marginal benefit > marginal cost = go ahead with decision. Incentive: things that encourage people to take action (cid:272)ha(cid:374)ges people"s behaviour. Ex: smoking is taxed heavier because it is unhealthy while carrots are taxed less because it is healthy. Unintended consequences: a policy designed to achieve one objective results in behaviour that is unexpected and even undesirable.
