ECON 101- Midterm Exam Guide - Comprehensive Notes for the exam ( 66 pages long!)

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Economics - the study of the choices people make to attain their goals, given their scarce resources. Scarcity - a situation in which unlimited wants exceed the limited resources available to ful ll those wants (wants > resources) Economic model - a simpli ed version of reality used to analyze real-world economic situations. Economic reasoning - continue any activity up to the point where the marginal bene t. Opportunity costs - the highest valued alternative that we must give up to get something. Ef ciency - the property of society getting the most it can from scarce resources. Equity - the property of distributing economic prosperity fairly among the members of society. Idea 1: people are rational - they take into account the limited resources and then make choices to achieve their goals. Idea 2: people respond to incentives - a reward that encourages an action or a penalty that discourages it.

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