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Chapters 1&2
Macro Midterm #1
Term | Definition |
---|---|
What are the Three Principles of Economics? | 1. People are rational. 2. People respond to incentives. 3. Optimal decisions are made at the margin. |
What does it mean that optimal decisions are made at the margin? | Any action is continued up to the point where MB=MC. |
Non-satiation Principle | More is always preferred to less. |
3 Questions of Economics | 1. What will be produced? 2. How will it be produced? 3. Who will receive the Goods and Services |
Positive Analysis | concerned with what is |
Normative Analysis | Concerned with what ought to be |
Five Factors of Production | 1. Natural Resources 2. Labor (# of workers) 3. Physical Capital (tools & machines) 4. Human Capital (skills) 5. Entrepreneurship (someone who is willing to work for the risk) |