PSY-0013 Study Guide - Economic Surplus, Deadweight Loss, Competitive Equilibrium
10 Apr 2014
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Document Summary
Trade-offs force society to make choices when answering the following three fundamental questions: To develop a model, economists generally follow these steps: decide on the assumptions to use in developing the model. C. use economic data to test the hypothesis: revise the model if it fails to explain well the economic data. E. retain the revised model to help answer similar economic questions in the future. Normative analysis: analysis concerned with what ought to be. Factors of production are divided into four broad categories: Labor includes all types of work, from the part-time labor of teenagers working at mcdonald"s to the work of top managers in large corporations. Capital refers to physical capital, such as computers and machine tools that is used to produce other goods. Natural resources include land, water, oil, iron ore, and other raw materials (or gifts of nature ) that are used in producing goods. An entrepreneur is someone who operates a business.
