When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives..
The economic policies are consistent with economic incentives
Economics
The study of the choices people make to attain their goals, given their scarce resources.
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
Marginal benefits equal;l marginal cost.
A market is a group of _______and______of a good or service and the institution of arrangement by which they come together to trade
Buyers and sellers
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and weighed all known benefits and costs, we are assuming rationality.
Scarcity
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economists calls...
Market Economies
When the decisions of households and firms determine what is being produced, how its produced, and how much is produced.
Centrally Planned Economies
An economy in which the government decides how economic resources will be allocated.
How do market economies ultimately determine what goods and services are produced, how the good and services are produced, and who will receive the goods and services?
Consumers determine what goods and services are produced, firms determine how to produce them, markets determine who will receive them.
Product Efficiency
Where goods and services are produced at the lowest possible cost.
Allocative Efficiency
Where production is consistent with consumer preferences
Equity
The fair distribution of economic benefits.
Mixed Economy
An economy in which most economic decisions result from the interactions of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
Opportunity Cost
The highest valued alternative that must be up to engage in an activity.
Three Fundamental Question
1) What goods and services will be produced
2) How will the goods and services be produced?
3) Who will receive the goods and services produced?
Deciders on what goods and services will be produced?
Consumers, firms, and government
Who receives goods and services depends largely on
How income is distributed
Economic Models are
Simplified versions of reality designed to analyze "what is" to explain human decision making in any context.
Positive Analysis
Concerned with "what is"
Measures the cost and benefits of different coerces of action
Normative Analysis
Concerned with "What ought to be
Macroeconomics
The economy as a whole, such as how rapidly the economy grows. topics such as inflation, unemployment and economic growth.
Microeconomics
How individual households make choices and how they react to changes in product prices