ESSENTIALS OF MICROECONOMICS Study Guide for Chapter One August 25&26 Definitions: Illustrations: Math: Be able to recognize the definition of terms on page 19 that were identified in lecture. No Illustrations for Chapter One No Math for Chapter One
Short-Answer Essays Preface 1. According to John Kenneth Galbraith, what is “conventional wisdom”? 2. What is a “heterodox economist”? 3. Define and briefly describe the following alternative schools of thought in economics. a. Austrian b. Institutionalist c. Radical d. Feminist e. Religious f. Post-Keynesian 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Chapter One Define “economics.” Explain the difference between micro and macroeconomics. List the four basic questions every society must answer. What is the fundamental economic problem? Explain the difference between marginal and sunk cost? Explain the “Economic Decision Rule.” Define and explain the difference between P and S variables. According to the work of Gary Becker, why do people have children? Why were birth rates higher in the 19th century? Examine voting via the Economic Decision Rule. Utilizing cost-benefit analysis, examine your decision to attend SUU. Utilizing cost-benefit analysis, examine your decision to attend class each day. Define “opportunity cost.” You purchase a stock for $80. Today the stock is worth $60. Should you sell the stock? You purchase a stock for $75. After one year the stock price rises by 10%. Another stock you could have bought a year ago has risen in price by 15%. Should you buy the other stock today? According to lecture, why did the British soldiers have red uniforms? According to Biddle and Hamermesh, do people with high or low incomes generally get more sleep at night? Why? “That Only Works in Theory.” Explain why such a statement would not apply to “good” theories. Be sure to define the term “Economic Theory.” Define the terms “Economic Models” and “Economic Principles.” List the six steps one follows in constructing and testing a theory. Briefly explain the role assumptions play in building a theory. Define and briefly explain the significance of “ceteris paribus.” Define the term econometrics. Explain how the nature of the data we utilize in economics hampers our ability to accept or reject theories. Explain the difference between positive and normative economics.