Economics Worksheet

Economic Concepts Worksheet

Concept Application of Concept from Personal Experience Reference to Concept in Reading

All of us make many decisions each day that require looking at the costs and benefits that we incur because of those decisions. The field of economics relies heavily on marginal analysis to explain economic concepts.

Marginal analysis involves considering the effects of small changes (additions or subtractions) to a current situation.

When my husband and I were buying for a house, we always would consider the marginal benefits and marginal costs of what type of house we could afford versus what type of house we wanted to purchase. "Marginal analysis refers to the comparison of marginal benefits and marginal costs"

(McConnell & Brue, 2004, pg. 4)

When individuals act to satisfy their wants, they behave rationally. Rational behavior is

consistent behavior that maximizes an individual's satisfaction. The notion of rational

behavior rests on three assumptions:

Ð'*First the individual has a preference and can identify, within limits, what he or

she wants.

Ð'*Second, the individual is capable of ordering his or her wants consistently,

from most preferred to least preferred.

Ð'*Third, the individual will choose consistently from these ordered preferences

to maximize his or her satisfaction.

Even though the individual cannot fully satisfy all her wants, she will always choose

more of what she wants rather than less. Furthermore, she will always choose less rather

than more of what she does not want. In short, the rational individual always stands

ready to further her own interests.

When I first started college, I wanted to major and in Biology to become a Pediatrician but when I did my research on what classes I needed to take and how long it would take, I opted to major in Liberal Studies to become a teacher which would still allow me to work with children. "Rational behavior refers to the behavior that the same person may make different choices under different circumstances"

(McConnell & Bruw, 2004, pg. 4)

Investing is spending money to make money.

As an adult you learn that money is valuable and that instead of spending it, it is wise to invest it for your future. I've been learning this every single day. I've learned that having investments can help you when you retire and could no longer work. "Investment refers to the process of producing and purchasing capital goods" (McConnell & Brue, 2004, pg. 23)

Substitute good is similar to a well-known item but at a lower price.

When