ECON 211 Study Guide - Fall 2018, Comprehensive Midterm Notes - Inflation, Aggregate Demand, Usa Today
ECON 211
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Journals
The Economist Magazine
USA Today
Wall Street Journal
Halloween
- Costume reflecting an economic concept
Limits, Alternatives, and
Economics: A social science concerned with using scarce resources to obtain the maximum satisfaction
of the unlimited material wants of society; all about people making choices
- Assumes individuals act rationally and in their own self-interest (not meaning selfish or greedy)
- Business purposeful in deciding what to produce and how
- Government purposeful in economic policy decisions (what services and how to provide them)
Economic Way of Thinking
- Scarcity and Choice
• TANSTAAFL: choices involve costs
- Rational Self-Interest
• People take action to achieve their greatest satisfaction
- Marginal benefits and costs
• Thinking on the margin
• Evaluate the marginal or additional cost or benefit
How to think, not what to think
1. People choose
2. Choices involve costs
3. People respond to incentives/disincentives in predictable ways
4. People create economic systems that influence individual choices and incentives
5. People gain from voluntary trade
6. Choices have consequences that lie in the future
7. Unintended consequences
Thinking on the margin ($, time, resources)
Why study economics?
- You are your own economist
- Economics for citizenship
- Personal and professional use of economics
Economic Principles
- Scientific Method (Observe --> Formulate a hypothesis --> Test hypothesis --> accept, reject, or modify
hypothesis --> continue to test the hypothesis, if necessary)
- Generalizations
- Other things equal assumption
- Graphical expression
Macro vs Micro
Macro
- Whole economy
- Sectors: consumer, business, government
Micro
- Individual units
- Sectors: individual markets and prices
find more resources at oneclass.com
find more resources at oneclass.com
Positive vs Normative
Positive
- Concerns what is; looks at facts and cause and effects; scientific approach to economic questions
Normative
- Concerns what ought to be; it is a subjective approach to economic issues based on values or opinions
Economic Problem
- Both individuals and society face an economic problem: they need to make choices because want
exceed means
Individual Economic Problem
Limited Income constrains individuals to make decisions on how to spend their money
Unlimited Wants include both necessities and luxuries; each type yields some level of utility
(satisfaction)
- Every individual must economize: choose goods and services that will maximize utility
Scarcity & Choice
- Scarce economic resources mean limited goods and services
• When a good is produced, resources employed can no longer be used to make another good
• When choice is made , another opportunity is passed up
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Economics: a social science concerned with using scarce resources to obtain the maximum satisfaction of the unlimited material wants of society; all about people making choices. Assumes individuals act rationally and in their own self-interest (not meaning selfish or greedy) Business purposeful in deciding what to produce and how. Government purposeful in economic policy decisions (what services and how to provide them) Scarcity and choice: tanstaafl: choices involve costs. Rational self-interest: people take action to achieve their greatest satisfaction. Marginal benefits and costs: thinking on the margin, evaluate the marginal or additional cost or benefit. Scientific method (observe --> formulate a hypothesis --> test hypothesis --> accept, reject, or modify hypothesis --> continue to test the hypothesis, if necessary) Concerns what is; looks at facts and cause and effects; scientific approach to economic questions. Concerns what ought to be; it is a subjective approach to economic issues based on values or opinions.
