- Macroeconomics - It is the study of the major components of economy. Ex: Inflation, supply & demand, wages and GDP.
Microeconomics
- It is the study of how households and firms make decisions and how they
interact with the market.
2. Positive economics - Claims the
attempt to describe the world as is, very descriptive. Ex: Minimum
wage laws cause unemployment.
Normative Economics – Claims that
attempt to predict how the world should be, opinion-based. Ex: The government should raise minimum
wage.
3. Needs – Basic requirements for
survival
Wants – Desires of citizens
4. Scarcity – Limited; not enough;
fundamental economic problem that all societies face we’ve satisfied unlimited
wants with limited resources. Ex: Oil and water.
Shortage – It is a situation
where quantity demanded is greater than quantity supplied. QD > QS.
5. Goods – A tangible commodity. Goods are bought, sold and traded; also
produced.
·
Consumer goods – Goods that are intended for
final use by the consumer.
·
Capital goods – Items used in the creation of
other goods such as factory machinery and trucks.
Services – Work that is performed
for someone else.
6.
Factors
of Production
1. Land
– natural resources
2. Labor
– work force
3. Capital
–
·
Human – The knowledge and skills a worker gains
through education and experience
·
Physical – Human made objects used to create
other goods and services. Ex: Buildings
and tools.
4.
Entrepreneurship – Being inventive, risk-taker and
having a product.
Trade-offs - Alternatives that we give up when we choose one course of action over another. Opportunity cost - We're choosing our next best alternative. Ex: wanted Sprite, but didn't have it, so you ask for Dr. Pepper; didn't have it, asked for Coke.
Production Possibility Curve - Shows the most that society can produce if it uses every available resources to the best of its ability.
Key Assumptions of PPG:
- Two goods are produced
- Full employment
- Fixed resources (land, labor and capital)
- Fixed state of Technology
- No international trade
Expansionary - Real output in the economy is increasing and the unemployment rate is declining.
Peak - Where real GDP is at its highest point.
Contractionary - Real output in the economy is decreasing and the unemployment rate is rising. (recession)
Trough - The lowest point of real GDP.
- One business cycle is from trough to trough.
