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Sacrificing one thing to have an other

  • conflicting goods/services

Marginal cost

Added expenses beyond that of another tradeoff
Positive vs. Normative Economics

pg. 10

  • Positive economics deals with how the market is, theory developement, cause and effect realationships, What the economy is actually like.

  • Normative economics deals with value judgments of what the economy should be, the desirability of certain economic aspects.

Oppurtunity Cost

pg. 27
The amount of other products that must be forgone or sacrificed to obtain 1unit of a specific good
Production Possibilities Curve

pg. 26

  • Each point represents the maximum combination of two products

  • More of one means fewer of another

  • Points inside are attainable ponits outside are not

livelyhood of people seeking/fufilment of utility
Factors and Holdings

  • private ownership rights (title) to resources

  • Hold private information about ownership preference i.e. likes/dislikes, wants, needs

  • Maximize utility

Marginal Benefit

Added benefits (utility)
Allocation of resources
How much of the resource goes into fufulling CC.
Consumption Choice
Favorable Combination
Factors and Holdings

  • Look to maximize profits

  • Hold/Know information about production and ability to implement(Produce)

Economic Principle

  • People are rational

  • Tradeofss

  • People are self interested

  • Rational people weight benefits vs. cost MB>MC

  • Cost---sacrifice of having a thing

  • rational people think at the margin

  • People rrespond to incentives

Free Enterprise Market
Decentralized market
ppc curve
Capital Market
Global market with no restriction,

i.e. Wall street
Collateriezd debt obligation

  • Lumping debts together(from seperate sources)

  • Investor is backed by a more deversifed claim

housing bubble
Economic orginization
A system and its effect on production/efficiency rooted in oppurtunity choice
Adam Smith

  • "Wealth of nations"

  • laissez-faire----Free market

  • Economic freedom, brings extra wealth


  • Social science concerned with the efficient use of scarce resources

  • the discipline that studies how people allocate scarce resources among alternatives, to maximize utility

replacable goods/services
A good/service that goes with another
Law of Demand
Refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship.
Economic Problem
How people allocate scarce resouces among alternatives to attain most utility
Law of Supply
Represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price.
Demand curve
Supply Curve
Circular Flow Model
A movement refers to a change along a curve. On the demand curve, a movement denotes a change in both price and quantity demanded from one point  to another on the curve. The movement implies that the demand relationship remains consistent. Therefore, a movement along the demand curve will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship. In other words, a movement occurs when a change in the quantity demanded is caused only by a change in price, and vice versa.

shift in a demand or supply curve occurs when a good''s quantity demanded or supplied changes even though price remains the same. For instance, if the price for a bottle of beer was $2 and the quantity of beer demanded increased from Q1 to Q2, then there would be a shift in the demand for beer. Shifts in the demand curve imply that the original demand relationship has changed, meaning that quantity demand is affected by a factor other than price. A shift in the demand relationship would occur if, for instance, beer suddenly became the only type of alcohol available for consumption.
  • Opposite of tax
  • Government spending
Competitive Market
Where there are sufficiently large numbers of buyers and sellers, such that no trader has influence on price
Relationship between consumer choice
  • Price of good/service
  • Buyers income
  • Buyes prefrences/taste
  • Price of substitutes Expectations of future costs
  • Tax/Subsidies
  • # of buyers in group
The amount sellers are willing to produce at a given price
  • Price of inputs
  • Technology
  • Price of good/service
Other things Constant
Assumes technology, price of inputs, expectations, tax/policies, and # of sellers do not change.
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