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What Economics Is
Economics is the study of how human beings coordinate their wants and desires, given the decisionmaking mechanisms, social customs, and political realities of the society.
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Coordination in Economics
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Scarcity the goods available are too few to satisfy individuals desires.
changing. The quantity of goods, services, and usable resources depends on technology and human action.
Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved.
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Understanding Economics
you need
Economic reasoning Economic terminology Economic insights about issues and theories that lead to those insights. About economic institutions. Information about economic policy options.
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Economic Reasoning
by comparing marginal costs and marginal benefits. Marginal cost the additional cost over and above costs already incurred. Marginal benefit the additional benefit above and beyond what has already accrued.
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Opportunity Cost
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Individual decisions
The opportunity cost of college includes
Items you could have purchased with the money spent for tuition and books loss of the income from a full-time job
Government decisions
The opportunity cost of money spent on the war on terrorism is less spending on health care or education.
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be rationed by some mechanism. Economic forces are the necessary reactions to scarcity. A market force is an economic circumstance that is given relatively free rein by society to work through the market.
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prices. The invisible hand is the price mechanism that guides markets. When there is a shortage, the price increases. When there is a surplus, the price decreases.
Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved.
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Economic Insights
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Economic Institutions
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Economic Policies
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Policy Analysis
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Policy Analysis
and how the economy works. Normative economics the study of what the goals of the economy should be. Art of economics the application of the knowledge learned in positive economics to achieve the goals determined in normative economics.
Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
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changing prices, is efficient under certain conditions. Economics can be divided into
Microeconomics the study of individual choice Macroeconomics the study of the economy as a whole Positive economics the study of what is Normative economics the study of what should be The art of economics relating positive to normative economics
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