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After reading this chapter, you should be able to:
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Describe how scarce resources and unlimited wants lead to the study
of economics. (Section 1.1)
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Define economics generally and distinguish between microeconomics
and macroeconomics. (Section 1.2)
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Identify three basic economic questions that all societies must
answer. (Section 1.3)
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Explain the difference between equity and efficiency and why there
is frequently a trade off between them. (Section 1.3)
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Identify the three kinds of economic systems societies must choose
among to answer the three basic economic questions and discuss their
Key Characteristics and central Organizing Principles, while also
explaining the reason and motivations for government involvement in
the market place. (Section 1.3)
- (Same
as #5) (Section 1.3)
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Discuss the degree of Personal Freedom under type of economic
system, and name some actual economies where these systems are more
or less in force. (Section 1.3)
- Recognize the strengths of the marketplace and discuss Adam Smith
and the Invisible Hand. (Section 1.3)
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Understand what a good model is and what assumptions are made by
economists in their models, define the concepts of “fallacy
of composition” and “ceteris paribus,” and distinguish positive
statements from normative statements. (Section 1.4)
- Explain why an economy based on incentives, as opposed to a
policy of egalitarianism, is crucial for economic prosperity.
(Section 1.5)
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