economics

suicide is always an option

Definition of Economics

studies on how agents make choices among scarce resources and how those choices affect society

Positive economics

describes what people actually do  

Normative economics

recommends what people including society should do 

Microeconomics

how individuals, firms and governments make choices

Optimization

making best choices possible with given info

Equilibrium

when everyone is optimizing; no one would be better off, when supply and demand are equal

Empiricism

using data to figure out answers to interesting questions

Scarce resources

things ppl want that exceed quantity

Scarcity

having unlimited wants in a limited world 

Budget constraint

a set of things that a person can choose without breaking budget

Opportunity cost

the best alternative use of a resource, sometimes a monetary value, sometimes time

Free Rider problem

when an individual or group who benefits from others without occurring cost 

Optimizing using marginal analysis

calculates the total value in change between options

Optimizing using total value

calculates the total value of each feasible option, then chooses the option of highest value.  

Marginal cost

change in costs between alternatives

Marginal Benefit

change in benefit when changing alternatives 

Marginal net benefit

change in net benefits when changing alternatives 

In a perfectly competitive market

sellers all sell identical goods or service, and any individual buyer/seller isn’t powerful enough on their own to affect the market price of the goods/service. Buyers and sellers can freely enter and exit the market.  

Quantity Demanded

The amount of good that buyers are willing to purchase at a set price

Demand Schedule

A table that reports the quantity demanded at different prices, with everything else equal

Demand Curve

Plots the quantity demanded at different prices.

Law of Demand

In almost all cases, quantity demanded rises when the price falls

What Shifts the Demand Curve

Change in preference, Changes in income, Normal and inferior goods, expectation of the future, prices of related goods /Change in number and scale of buyers

internalize externalities

ensuring the producers or seller bears the full cost/responsibility