Econ 211 UTK Exam 1 Complete Answers
Economics - Definition: - ️ The study of how people make decisions given the scarcity of resources.
Key Concepts - Incentives: - ️ A positive or negative environmental stimulus that motivates behavior. - Ceteris Paribus: - ️ Meaning everything else ...
- ✔️ The study of how people make decisions given the scarcity of resources.
Key Concepts
- Incentives:
- ✔️ A positive or negative environmental stimulus that motivates behavior.
- Ceteris Paribus:
- ✔️ Meaning everything else stays the same.
- Three Things You Can Never Have Enough Of:
- ✔️ Time, money, and resources.
- Microeconomics:
- ✔️ The study of how households and firms make decisions and how they interact in markets.
- Economic Model:
- ✔️ A simplified version of reality used to analyze real-world economic situations.
- Positive Analysis:
- ✔️ Analysis concerned with what is (can be answered using facts and information).
- Normative Analysis:
- ✔️ Analysis concerned with what ought to be (based on beliefs and/or opinions).
, - Equity:
- ✔️ Fairness.
Fundamental Assumptions in Economics
- ✔️ 1. People are rational.
- ✔️ 2. People are self-interested (opposite is altruistic).
- ✔️ 3. People respond to incentives.
Additional Definitions
- Marginal:
- ✔️ Additional.
Economic Systems
- Capitalist/Market Economy:
- ✔️ Private individuals and firms own most of the resources; innovation due to competition;
government role is to protect property rights.
- Communist/Planned Economy:
- ✔️ Most resources owned by the government.
- Mixed Economy:
- ✔️ A mixture between capitalist/market and communist/planned.
Factors of Production
- ✔️ Four Factors: Land, labor, capital, entrepreneurship.
Investment
- Definition:
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