Basic Economics

Basic Economics

• Macroeconomics vs. Micro Economics  

1. Macro- the study of the economy as a whole
2. Micro-The study of individual parts of the economy "Looking at trees and not the forest"

• Positive vs. Normative Economics 

1. Positive- Claims that attempt to describe the world as is.

Ex:Minimum wage laws cause unemployment(fact)

1. Normative- Claims that attempt to describe how the world should be.

Ex: The Gov. should raise the Minimum wage (opinion based)

• Wants vs. Needs 

1. Wants-something that is desired by citizens 
2. Needs- Basic requirements for survival

• Goods vs. Services 

1. Goods- Tangible Object: Capital goods vs. Consumer goods 
2. Capital- Items used in the creation of other goods 
3. Consumer-Goods that are intended for final use by consumer 
4. Services- work performed by one person for another service 

• Factors vs. Production

1. land- Natural Resources 
2. Labor- Work exerted 
3. Capital- Human , Physical 
4. Human- Knowledge and skill a worker gains through education and experience 
5. Physical- Human made objects used to create other goods and services 
6. Entrepreneurship- Innovate and risk taker 

• Trade offs: alternative choices people face when making an economic decision 
• Opportunity Cost: The most disirable alternative given up when making a decision 

Scarcity- Fundamental Economic problem that all society's face ( How to satisfy unlimited wants with limited resources.)

Shortage- Quantity Demanded> Quantity  Supply (temporary)