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by: Elmore Funk


Elmore Funk
GPA 3.64

Joab Corey

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About this Document

Joab Corey
Class Notes
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This 2 page Class Notes was uploaded by Elmore Funk on Thursday September 17, 2015. The Class Notes belongs to ECO 2013 at Florida State University taught by Joab Corey in Fall. Since its upload, it has received 20 views. For similar materials see /class/205445/eco-2013-florida-state-university in Economcs at Florida State University.




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Date Created: 09/17/15
EC02013 EXAM 1 Chapter 1 0 Know that Economics is the study of how we make choices under scarcity 0 Understand the concept of scarcity there is less of a good freely available from nature than people would like since goods are scarce we have to nd a way to allocate them thus the price system scarcity means competition 0 Know the difference between the different kinds of resources that we use to produce economic goods Human resources capital physical resources capital natural resources 0 Know the 8 guideposts to economic thinking 1 Resources are scarce so tradeoffs must be made Opportunity cost the highest valued alternative that must be sacrificed when choosing an option Individuals are rational they try to get the most from their limited resources greatest benefit at the least possible cost 3 Incentives matter choice is in uenced in a predictable way when incentives matter ie money game 4 Individuals make decisions at the margin Marginal describes the effect of a change in the current situation Costbenef1t analysis one will undergo an action when the marginal benefits outweigh the marginal costs ie driving vs ying Information helps us make better choices but is costly Beware of secondary effects economic actions generate both direct amp indirect effects 7 The value of a good or service is subjective because goods are subjective voluntary trade creates value The test of a theory is its ability to predict if real world events are consistent w a theory then that theory is valid Know the difference between positive and normative economic statements positive economic statements are testable normative economic statements are not 0 Know the four pitfalls to avoid in economic thinking 1 Violation of the ceteris paribus all other things constant principle ie ifthe price of eggs increases people buy less eggs 2 The belief that good intentions equal desirable outcomes ie suicide warnings on antidepressant meds 3 The belief that association is causation just bc 2 things happen together doesn t mean that they happen bc of one another ie superstitions 4 The fallacy lie of composition belief that what is true for one might not be true for all 5 6 9


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