Ec10 Final Cheat Sheet PDF

Positive statements describe what people actually do, Normative statements describe what people, including society, ought to do - opportunity cost: the (best) alternative use of a resource; what you are giving up to use/make a resource (variable you are finding the opportunity cost of goes in the de...

Positive statements describe what people actually do, Normative statements describe what people, including society, ought to do - opportunity cost: the (best) alternative use of a resource; what you are giving up to use/make a resource (variable you are finding the opportunity cost of goes in the denominator) Randomized controlled trial (RCT): situation in which randomized assignment creates multiple groups that are identical except for some element randomly assigned by the experiments. The Coase Theorem: private bargaining will result in an efficient allocation of resources when transaction costs are low and property rights are clearly defined. Natural experiment: help economists identify which correlations are also causal relationships, Natural experiments aren’t random, the division of groups is just naturally occurring Cartel: With a cartel, you get all the harms of a monopoly but not the potential efficiency benefits. Homo economicus: a model of humans as agents who a) are perfectly rational, b) are materially self-interested, and c) have perfect self-control Binding price floor (prohibit a seller from charging below a set amount for a good/service → reduces consumer surplus if floor is above the equilibrium price; ex) minimum wage) → leads to a surplus of goods/services (Qs>QD) Binding price ceiling (prohibit a seller from charging above a set amount for a good/service → reduces producer surplus if ceiling is below the equilibrium price; ex) rent control→ leads to a shortage of goods/services (Qs