Macroeconomics- (big picture)
microeconomics- individual or specific units of the economy/ how people make decisions and interact with the market
Positive Economics vs. Normative Economics
Positive Economics: claims that attempt to describe the world as it is very descriptive in nature ( fact based)
Normative Economics: claims that attempt to prescribe how the world should be (opinion)
Needs vs. Wants
Needs: Basic requirement for survival
Wants: Desire
Scarcity vs. Shortage
Scarcity: Fundamental economic problem that all society face/ How to satisfy unlimited wants with limited resources
Shortage: Quantity demanded exceeded quantity supplies
Goods vs. Services
Goods: tangible
capital goods: Items used for other goods
consumer goods: goods that are intended by final use
services: work that is performed for someone
Factors of Production
Land: natural resources
Labor: work exerted
Capital: Human capital- when people acquire skills and knowledge through experience and education. Physical capital- money, tools, buildings, and machinery
Entrepreneurship: risk taking, innovative, uses all 3 factors to promote
Trade Offs: alternative that we sacrifice when we make a decision
Opportunity Cost: next best alternative
Guns or Butter: refers to the trade offs that a country faces when choosing whether to produce more or less of military goods or consumer goods
Thinking at the Margins: deciding whether to add or subtract one additional unit of some resource
Opportunity Cost: next best alternative
Guns or Butter: refers to the trade offs that a country faces when choosing whether to produce more or less of military goods or consumer goods
Thinking at the Margins: deciding whether to add or subtract one additional unit of some resource
EASY GUIDE TO UNDERSTAND THIS LESSON BELOW!
Discussion Question:
Could opportunity cost be considered as a negative output that economy shows?
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