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Principles of Microeconomics - Foundations and Economic Way of Thinking

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Termini in questo insieme (23)

  • What is economics?

    Economics studies how individuals and societies choose to use scarce resources, which are limited relative to wants.

  • Define scarcity in economics.

    Scarcity means resources are limited relative to what people want, forcing choices.

  • What is microeconomics?

    Microeconomics studies individual decision-making units and specific markets.

  • Why study economics?

    Economics changes how you see life by revealing scarcity, tradeoffs, incentives, and marginal decisions, helping understand society and support informed citizenship.

  • What is opportunity cost?

    Opportunity cost is the value of the next best alternative forgone when making a choice.

  • Why is opportunity cost important?

    It reveals hidden tradeoffs and shows that "free" resources are rare, helping compare alternatives properly.

  • Explain marginalism.

    Marginalism analyzes additional costs and benefits of one more unit of an activity to decide if it is worthwhile.

  • What is the decision rule in marginalism?

    Take an action if marginal benefit > marginal cost; avoid it if marginal cost > marginal benefit.

  • What are sunk costs?

    Sunk costs are costs already incurred and unrecoverable; they should not affect current decisions.

  • Why should sunk costs be ignored in decisions?

    Because they cannot be recovered, only future costs and benefits matter for current choices.

  • How does economic reasoning help understand society?

    It explains how choices by individuals and firms shape work, trade, technology, and social outcomes.

  • What is the difference between microeconomics and macroeconomics?

    Microeconomics studies individual units and markets; macroeconomics studies the economy as a whole.

  • Give an example of a microeconomic question.

    "Why did coffee prices rise near campus?" focuses on a specific market and is microeconomic.

  • Give an example of a macroeconomic question.

    "Why is national inflation above target?" focuses on the aggregate economy and is macroeconomic.

  • What is a theory in economics?

    A theory is a deliberate simplification used to explain how part of the world works.

  • Why do economists use models?

    Models simplify reality to highlight relevant forces and produce useful predictions.

  • What does ceteris paribus mean?

    Ceteris paribus means holding other things constant to isolate one relationship at a time.

  • Why is ceteris paribus important in economic analysis?

    It helps clarify cause and effect by focusing on one variable while holding others fixed.

  • What does economic policy analysis involve?

    Evaluating actions by considering benefits, costs, incentives, tradeoffs, and distributional effects.

  • Why can two people agree on evidence but disagree on policy?

    Because they may weigh efficiency, fairness, risk, freedom, and distribution differently.

  • What is a common mistake regarding opportunity cost?

    Confusing opportunity cost with the sum of all alternatives instead of the best forgone alternative.

  • Why is average cost not always relevant for decisions?

    Because decisions often depend on marginal cost, the cost of one more unit, not the average cost.

  • What is the key takeaway about sunk costs?

    Sunk costs should not influence current decisions since they cannot be recovered.