ECN 104 Study Guide - Midterm Guide: Tax Incidence, Inferior Good, Economist Group

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21 Jul 2016

Document Summary

Chapter 1: ten principles of economics: people face trade-offs. Efficiency: the property of society getting the most it can from its scarce resources (the limited nature of society"s resources) Equity: the property of distributing economic prosperity fairly among the members of society. Ex: trade-off between work and leisure, buying a good or another one: the cost of something is what you give up to get it. Opportunity cost: whatever must be given up to obtain some item. Decision makers should be aware of opportunity cost: rational people think at the margin. Rational people: people who systematically and purposefully do the best they can to achieve their objectives. Marginal changes: small incremental adjustments to a plan of action: how people make decisions. Incentive: something that induces a person to act: trade can make everyone better off. Property rights: the ability of an individual to own and exercise control over scarce resources.

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