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Macro Notes

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Chapter 1 notes: * Economics: a social science that examines how people choose among the alternatives available to them. * Scarcity: the condition of having to choose among alternatives * Scarce good: a good for which the choice of one alternative requires that another be given up * Free good: a good for which the choice of one use does not require that another be given up * Important questions: * What should be produced * How should goods and services be produced * For whom should goods and serviced be produced * Opportunity cost: the value of the best alternative forgone in making any choice * Economists study choices that scarcity requires us to make * Economic approach to choice: * Economists give special emphasis to role of opportunity costs * Assume that individuals makes choices that maximize the value of some objective and they define their objectives based on self-interests * Individuals maximize by choosing to do little more or little less of something; argue that individuals pay attention to the consequences of small changes in the levels of activities they purchase * Economic way of thinking pushes us to the value of alternatives in each choice we make * Margin: current level of activity * Choice at the margin: decision to do a little more or little less of something * Microeconomics: branch of economics that focuses on the choices made by individual decision-making units in the economy and the impacts those choices have on individual markets * Macroeconomics: branch of economics that focuses on the impact of choices on the total or aggregate level of economic activity * Variable: something whose value can change * Constant: something whose value does not change * Scientific method: a systematic set of procedures through which knowledge is created * Hypothesis: an…...

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