Unit 1 Notes (1/7/15)

Macroeconomics vs. Microeconomics

Macroeconomics: Study of major components of economy. (Ex. Inflation, GDP, international trade)

Microeconomics: Study of how households make decisions and how they interact in market. (Ex. Supply & Demand, market structures) 

Positive vs. Normative Economics

Positive: Claims that attempt to describe world as it is; very descriptive. (FACT) (Ex. Minimum wage laws changes unemployment) 

Normative: Claims that attempt to describe how the world should be; very prescriptive in nature. (OPINION) (Ex. Government should raise the minimum wage.) 

Needs vs. Wants

Needs: Basic requirements for survival.

Wants: Desires of citizens. (more broader than needs)

Scarcity vs. Shortage

Scarcity: Most fundamental economy; problem funding all society. 

What is it? Satisfying unlimited wants with minimal resources. (MORE PERMANENT) (Ex. Water, oil) 

Shortage: Situation quantity demand is greater than quality supply. QD>QS (TEMPORARY) 

Goods vs. Services: 

Goods: 2 types of goods-

Consumer Goods: Goods intended for final use by the consumer. (Ex. chocolate)

Capital Goods: Items used in creation of other goods. (Ex. factory machinery, trades)

Services: Work that is performed for someone else. 

Factors of Production:

1. Land: Natural resources. 
2. Labor: Work force.
3. Capital: 2 Types 

Human Capital: Knowledge and skills gain through education and experience. 

Physical Capital: Human made objects used to create other goods and services. 

4.  Entrepreneurship: To be entrepreneur, have to be innovator and risk taker.