Economics Learning Objectives

• Foundations
  • Discuss the difference between microeconomics and macroeconomics.
  • Evaluate the role that rational self-interest plays in economics analysis.
  • Explain why economics is a science.
  • Distinguish between positive and normative economics.
    • Positive Economics = Making descriptive statements or predictions
    • Normative Economics = Value judgments about policies.  Relates to outcomes that are good or bad.  A statement of what “ought” to be.
• Chapter 2
  • • Evaluate whether even rich people face the problem of scarcity.
    • Understand why economics considers individuals’ wants but not their needs.
    • Explain why the scarcity problem induces individuals to consider opportunity costs.
    • Discuss why obtaining increasing increments of any particular good typically entails giving up more and more units of other goods.
    • Explain why society faces a trade-off between consumption goods and capital goods.
  • Chapter 3, 4
    • Explain the law of demand.
    • Discuss the difference between money prices and relative prices.
    • Distinguish between changes in demand and changes in quantity demanded.
    • Explain the law of supply.
    • Distinguish between changes in supply and changes in quantity supplied.
    • Understand how the interaction of the demand for and supply of a commodity determines the market price of the commodity and the equilibrium quantity of the commodity that is produced and consumed
    • Discuss the essential features of the price system
      • Exchange and Markets
      • Transaction Costs
      • Platform Firms
    • Evaluate the effects of changes in demand and supply on the market price and equilibrium quantity.
    • Understand the rationing function of prices.
    • Explain the effects of price ceilings.
    • Explain the effects of price floors.
    • Describe various types of government-inspired quantity restrictions on markets.
  • Chapters 5 and 6
    • Explain how market failures such as externalities might justify economic functions of government.
    • Distinguish between private goods and public goods and explain the nature of the free-rider problem.
      • Functions
        • Legal System
        • Promoting Competition
        • Providing Common Goods
        • Ensuring economy wide stability
      • Describe the political functions of government that entail its involvement in the economy.
        • Government sponsored and Government-inhibited goods
        • Income Redistribution
      • Discuss the central elements of the theory of public choice.
        • Collective Decision Making
        • Theory of Public Choice
        • Similarities with Market Choice
          • Opportunity Cost
          • Competition
          • Similarity of Indiviudals
        • Differences
          • Government can price goods at zero price
          • Use of force
          • Voting vs Spending
        • Chapter 6
          • Distinguish between average tax rates and marginal tax rates.
          • Explain the structure of the US tax system.
          • Understand the key factors influencing the relationship between tax rates and the tax revenues that governments collect.
          • Explain how the taxes governments levy on purchases of goods and services affect market prices and equilibrium quantities.