Download Economic Analysis: Understanding Goods, Services, and Markets and more Study notes Microeconomics in PDF only on Docsity! Chapter 1 The Art and Science of Economic Analysis These slides supplement the textbook, but should not replace reading the textbook 2 What is the economic problem? Because we live in a world of scarce resources, but people have unlimited wants and needs, how do we meet their needs in this world of scarcity? 5 What is macroeconomics? The study of the economic behavior of entire economies 6 What is microeconomics? The study of the economic behavior in particular markets, such as the market for computers 7 What is a good? A tangible item that is used to satisfy wants 10 What is a Scarce Good or Service? There is not enough of a good or service to go around to everyone who wants it for free 11 When is a good or service scarce? When the amount people desire exceeds the amount available to them at a zero price 12 What is a resource? Something that is used to produce goods and services 15 What is labor? The physical and mental efforts of humans used to produce goods and services 16 What is capital? Buildings, equipment, and human skills used to produce goods and services 17 What is entrepreneurial ability? Managerial and organizational skills combined with the willingness to take risks 20 What are wages? The payment resource owners receive for their labor 21 What is interest? The payment resource owners receive for the use of their capital 22 What is profit? The return resource owners receive for their entrepreneurial ability 25 What is a product market? A market in which goods and services are exchanged 26 What is a resource market? A market in which resources are exchanged 27 What does the term marginal mean? A term used to describe the result of a change in an economic variable 30 What is the other-things- constant assumption? The assumption, when focusing on key economic variables, remains unchanged 31 What is the behavioral assumption? An assumption that describes the expected behavior of economic actors 32 What is an hypothesis? A statement about relationships among key variables 35 What are some pitfalls of economic analysis? Association-is- causation fallacy Fallacy of composition Secondary effects 36 What is the association- is-causation fallacy? The incorrect idea that if two variables are associated in time, one must necessarily cause the other 37 What is fallacy of composition? The incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or whole
