Chapter 1

Question 1

scarcity

Answer 1

limited in availability related to human wants

Question 2

the father of modern economics and his book

Answer 2

Adam Smith and An Inquiry into the Nature and Causes of the Wealth of Nations (1776)

Question 3

eight guideposts of economic thinking

Answer 3

1. tradeoffs must be made bc of scarce resources
2. individuals choose purposefully (self-interest)
3. incentives matter
4. individuals make decisions at the margin
5. information is costly
6. economic actions often have secondary consequences
7. economic value is subjective
8. the test of a theory is its ability to predict

Question 4

what are the pitfalls of economic thinking?

Answer 4

1. violation of ceteris paribus condition
2. association is not causation
3. fallacy of composition
4. *blind projection of trends
5. *the misuse of mathematics

Question 5

ceteris paribus

Answer 5

other things constant

Question 6

positive vs. normative economics

Answer 6

scientific/positive: what is, explains actual consequences; normative: what ought to be