ECO-2013 Study Guide - Midterm Guide: Frictional Unemployment, Potential Output, Nominal Interest Rate
Document Summary
Measure using: life expectancy, health, income, education, and entertainment. Resources: an input used to produce any economic good: human capital ex: albert einstein, physical capital, natural resources. Capital - human made resources used to produce other goods. 8 guide points to economic thinking: resources are scarce tnstaafl must make tradeoffs, opportunity cost the highest value alternative given up. Individuals are rational greatest benefit at the least possible cost: ex: chickfila vs. 5 guys; welfare vs. education. Incentives matter choice is influenced in a predictive way by changing incentives: ex: money game. Individual make decisions at the margin: marginal comparing one option to another and the effects, cost benefit analysis: one will undergo an action when marginal benefit is greater than marginal cost. Ex: airport security vs. lead clean up. Positive: the scientific study of what is (testable) Normative: judgements about what people think ought to be (not testable)
