EC120 Study Guide - Midterm Guide: Invisible Hand, Normal Good, Absolute Advantage

• School: WLU
• Department: Economics
• Course: EC120
• Professor: Peter Sinclair

Document Summary

Economists analyze forces and trends affecting the economy. Ppl face trade-offs equity vs efficiency; ppl are likely to make good decisions only if they understand the available options (i. e. redistribute to cause least efficiency loss) Opportunity costs giving up something to obtain something else incl. implicit and explicit costs; excl. sunk costs and costs that will be incurred (e. g. taxes) Rational people think at the margin doing your best to achieve objectives; consider how a change might impact your action plan; act when marginal benefit > marginal costs. People respond to incentives things that induce a person to act; weigh the pros and cons. Trade can make everyone better off specialize in what you"re good at and xchange for other goods trading allow parties to enjoy variety of goods. Markets = good way to organize econ activity adam smith"s invisible hand: gov"t hinders market growth and should just let the market forces do their thing.