Econ chapter 1 Word Scramble
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| Question | Answer |
| Define scarcity | When your wants are constrained by limited resources |
| What is the economic question related to scarcity? | What are the wants and constraints of those involved? |
| What is rational behavior? | Making choices to achieve goals in the most effective way possible |
| What is opportunity cost? | The trade off between costs and benefits |
| Define true cost | The amount you pay for a good and the opportunity you lose to do something else with that money instead |
| What is marginal decision making? | The idea that rational people compare the additional benefits of a choice against the additional costs WITHOUT CONSIDERING RELATED BENEFITS OF COSTS AND PAST CHOICES |
| Define sunk costs | Past choices, or costs that have already been incurred and cannot be reversed |
| Define incentives | Something that causes people to behave in a certain way by changing the trade-offs they face |
| What is the economic question related to incentives? | How will others respond? |
| What are the assumptions economists make about incentive? | People will respond to incentives and that nothing happens in a vacuum (any action or change will have some kind of reaction) |
| Explain efficiency | When resources are used in the most productive way possible to produce the goods and services that have the greatest total economic value to society |
| What is the economic question related to efficiency? | Why isn't everyone doing it already? |
| Define correlation | A consistent relationship between two events or variables |
| Define positive correlation | If two events or variables tend to occur at the same time or move in the same direction |
| Define negative correlation | When one event or variable increases while a related event or variable decreases |
| Define causation | A relationship between two events in which one event brings about the other |
| Why are the two often confused? | Correlation without causation, omitted variables, and reverse causation |
| Explain correlation without causation | When there is no plausible cause and effect relationship - two things randomly occur at the same time and move in the same direction but are not caused by each other |
| Explain omitted variables | Two events that occur together because both are caused by the same underlying factor (ex: firefighters and people with serious burns) |
| Explain reverse causation | Knowing which event caused which - sometimes because two events appear to have a causational relationship, it can be unclear which caused the other |
| Define a model | A simplified representation of a complicated situation |
| Why are models only approximately right? | Because they are a simplification |
| List the characteristics of a good model | It predicts cause and effect, it makes clear assumptions, and it describes the real world accurately |
| Define positive analysis/statements | A statement/analysis that makes a factual claim about how the world actually works - can be proved by data or evidence |
| Define normative analysis/statements | A statement/analysis that makes a claim about how the world should work - cannot be proven true or false |
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sarah.levitt7
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