⭐UNIT 1 BASIC ECONOMIC CONCEPTS

Difference between Micro and Macro economics

Macroeconomics-  the study of economics as a whole. (BIG PICTURE)

Microeconomics- the study of individual or specific units of the economy. (SMALL PICTURE)

Positive vs Normative Economics

Positive: claims to describe the world as is. (FACTS)
ex: minimum wage laws cause unemployment.

Normative: claims that attempt to say how the world should be (OPINION)
ex: the government should raise min wage.

Want vs Needs

Want: desire, optional (cellphone, tv)

Need: necessity to survive (water, food, air)

Scarcity vs Shortage

Scarcity: problem that all societies face, how to satisfy UNLIMITED wants with LIMITED resources?

Shortage:  Quantity Demand > Quantity Supply

Goods vs Services

Goods : tangentable object. 

E1: consumer goods, (goods intended for final use by consumer) Ipod, Tv, Barbie

E2: Capital Goods (items used to create other goods) plastic,wood,

Services:  action performed by one person for another.

Factors of Production

1.Land : Natural resources

2.Labor: the workforce

3.Capital: Human Capital: Knowlege and skills a                       worker gains through education and                         experience
               Physical Capital: human-made objects                       used to create other goods and services.

4.Entrepreneurship: inventive and risk-taking.

Opportunity Costs:

the most desirable alternative given up by people when making a decision.

tradeoffs: alternative decisions that people make when faced with an economic dilemma.