What is Economics?
What is Economics all about?
Choices
What are the two main types of economics?
define The Cost-Benefit Principle
pursue a choice only if the benefits ≥ cost
This law states that, holding everything else constant, quantity demanded falls when price rises.
law of demand
What causes choices to be made?
Scarcity
What is positive economics?
Facts about the economy
ex. An increase in the minimum wage leads to higher unemployment among low-skilled workers.
What is the opportunity cost in the following scenario?
A student has 3 free hours and can either study for an economics exam or work a shift earning $45. The student chooses to study.
What is the opportunity cost of studying?
$45
A change in income that leads consumers to buy more of a good when income rises describes this type of good.
normal good
how much of your grade is class participation?
6.67 %
How do you define efficiency in economic terms?
A situation in which it is not possible to make someone better off without making someone worse off.
What is normative economics?
What someone believes ought to be. (opinions)
The government should raise the minimum wage to ensure workers earn a living wage.
What type of cost should you not consider when making a decision?
sunk costs
This term describes a movement along the demand curve caused solely by a change in price.
change in quantity demanded
how many midterms do you have?
2
Why does scarcity exist?
The society needs to address unlimited wants with a limited set of resources
What is an example of positive economics?
open-ended
How does a producer know when to stop producing a good?
marginal benefit = marginal cost
In consumer choice theory, this curve shows all combinations of two goods that give a consumer the same level of satisfaction.
indifference curve
yes, no
The study of people “in the ordinary business of life”
What is an example of normative economics?
open-ended
Which of the following best illustrates the principle of interdependence in economics?
A. A student decides to save more money for the future.
B. A country produces all goods domestically to avoid trade.
C. A coffee shop relies on farmers for beans, delivery drivers for transport, and customers for revenue.
D. A firm raises prices to increase profits.
C
This concept explains how consumers allocate their budget to maximize utility given prices and income.
utility maximization