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Econ Ch 1
| Term | Definition |
|---|---|
| Law of Unintended Consequences | When smth is passed, there will be unanticipated negative consequences |
| Primary Effect | Intended effect of a policy |
| Secondary Effect | How ppl affected by policy change their behavior |
| How does policy act when the secondary effect is greater than the primary? | The policy increases the problem it was meant to solve |
| How does policy act when the secondary effect is less than the primary? | Policy solves the problem (at a cost) |
| People behave certain ways for what reasons? | Scarcity, rationality, and self-interest |
| Scarcity is also known as? | Economic goods |
| Scarcity | Amount of good wanted is more than what exists |
| Rationality | Ability to set a well-defined goal and achieve it |
| Does a rational person move towards or away from their goal? | Towards |
| What type of person moves away from their goal? | Irrational |
| Self-interest | Care more about your own goals than that of others |
| What is the total economic surplus equation? | Total benefits-total cost |
| Rule for Rationality | Total economic surplus is maximized |
| Rule of Rationality is also known as? | Cost benefit principle |
| Incentive | When a cost/benefit is changed for behavior |
| Marginal Benefit | Additional benefit when consuming one more unit of good |
| Marginal Cost | Additional cost increased by producing one more unit of good |
| When is economic surplus maximized? | When marginal benefit equals marginal cost |
| Law of Diminishing Marginal Benefit | The more consumption of a good, the less total benefit,,,benefits of more consumption increase at a decreasing relationship |
| What is the equation for marginal benefit? | Change in total benefit over change in consumption |
| Law of Increasing Marginal Cost | Work increases for increase in benefit |
| What is the equation for marginal cost? | Change in total cost over change in consumption |
| Microeconomics | Interactions between buyers and sellers in indiv. markets |
| Macroeconomics | Economy as a whole (ex: inflation rate) |
| Positive Statements | Shown true or false based on objective facts |
| What type of statement can fair minded people agree on? | Positive |
| Normative Statements | Based on subjective value judgements of right or wrong |
| "is" and "will" go with what type of statement? | Positive |
| "aught" and "should" go with what type of statement? | Normative |
Created by:
MikalahQuillen
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