Economic thinking is marginal thinking the cost of adding one more unit of good (what is the value of producing one more good – that is marginal value) 5. He acquisition of information is costly information can help people make better sections, but information is a scarce good – the time it takes to search for the information is time that could be spent doing something else 6. Economic actions often generate secondary effects in addition to their immediate effects secondary effects are effects of a policy change that might not be noticeable when the policy change is implemented 7. He value of a good or service is subjective what one good is worth to person A, may have a completely different value by person B (l like pizza with extra cheese, I value it highly. You are allergic to dairy products, so you place a low value on a pizza with extra cheese) 8. He test of a theory is its ability to predict Positive and normative economics Positive economics – the study of “what is” among economic relationships For instance, positive statements can be statistically evaluated.
Normative economics – judgments about “what ought to be” in economic matters Normative statements merely reflect people’s values – these statements cannot be proven true or false by economic thinking (think of it as a politician’s views on any matter – abortion, capital punishment, etc. Those opinions cannot be proven right or wrong – they can merely be Judged) Economic way of thinking By gangplank