Econ Ch 1
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| Law of Unintended Consequences | When smth is passed, there will be unanticipated negative consequences
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| Primary Effect | Intended effect of a policy
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| Secondary Effect | How ppl affected by policy change their behavior
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| How does policy act when the secondary effect is greater than the primary? | The policy increases the problem it was meant to solve
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| How does policy act when the secondary effect is less than the primary? | Policy solves the problem (at a cost)
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| People behave certain ways for what reasons? | Scarcity, rationality, and self-interest
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| Scarcity is also known as? | Economic goods
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| Scarcity | Amount of good wanted is more than what exists
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| Rationality | Ability to set a well-defined goal and achieve it
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| Does a rational person move towards or away from their goal? | Towards
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| What type of person moves away from their goal? | Irrational
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| Self-interest | Care more about your own goals than that of others
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| What is the total economic surplus equation? | Total benefits-total cost
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| Rule for Rationality | Total economic surplus is maximized
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| Rule of Rationality is also known as? | Cost benefit principle
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| Incentive | When a cost/benefit is changed for behavior
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| Marginal Benefit | Additional benefit when consuming one more unit of good
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| Marginal Cost | Additional cost increased by producing one more unit of good
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| When is economic surplus maximized? | When marginal benefit equals marginal cost
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| Law of Diminishing Marginal Benefit | The more consumption of a good, the less total benefit,,,benefits of more consumption increase at a decreasing relationship
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| What is the equation for marginal benefit? | Change in total benefit over change in consumption
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| Law of Increasing Marginal Cost | Work increases for increase in benefit
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| What is the equation for marginal cost? | Change in total cost over change in consumption
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| Microeconomics | Interactions between buyers and sellers in indiv. markets
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| Macroeconomics | Economy as a whole (ex: inflation rate)
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| Positive Statements | Shown true or false based on objective facts
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| What type of statement can fair minded people agree on? | Positive
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| Normative Statements | Based on subjective value judgements of right or wrong
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| "is" and "will" go with what type of statement? | Positive
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| "aught" and "should" go with what type of statement? | Normative
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