- Oklahoma Christian University of Science & Arts
- Economics 1213
- Test 2
Last Modified: 2011-07-16
what goods and how many of them should be produced? (gov. est)
what resources should be used in production?
at what price should the goods be sold/purchased
( what you need vs supply)
2. the cost of something is what you give up to get it
3. rational people think at the margin
4. people respond to incentives
6. markets are usually a good way to organize economic activity
7. governments can sometimes improve economic outcomes
9. prices rise when the government prints too much money (inflation)
10. society faces a short-run tradeoff between inflation and unemployment
~to get one thing, we usually have to give up another thing
~make decisions requires trading off one goal against another
~guns vs butter!
~advancement of society
~means some will get them and some won"t
~everyone gets a slice of the pie
~equality of society
~the opportunity cost
~Kobe bryant sacrifice education for a few million
~people make decisions by comparing costs and benefits at the margin
~leads to est. a cost/benefit analysis or CBA
~decisions to choose one alternative over another occurs when that alternative's marginal benefits exceed its marginal costs
~competition results in gains from trading
~trade allows people to specialize in what they do best (comp. adv)
supply and demand module
adam smith made the observation that households and firms interacting in markets act if guided by invisible hand
~households decide what to buy and who to work for
1. by comparing personal incomes
2. by comparing the total market value of a nation's production (compare PPD)
~one cause of inflation is the growth in the quantity of money
~when gov creates large quantities of money , the value of money falls
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