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Define: Economics
the study of how people make choices among limited alternatives.
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Microeconomics
the branch of economics that focuses on the choices made by individual decision
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Macroeconomics
the branch of economics that focuses on the impact of choices on the total, or aggregate, level of economic activity
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Economic systems primarily face the following
questions (3)
- 1. What get produced?
- 2. How shall it be produced?
- 3. Who gets it?
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Define: Positive Statement
Fact, or hypothesis
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Define: Normative
Value judgement, or opinion
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Define: Economic Model
A simplified representation of economic reality showing the interrelationships between selected economic variables
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Factors of Production (3)
- 1. Labor
- 2. Capital
- 3. Natural Resources
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Define: Natural Resources
Found in nature, with no human involvement; can be used to produce goods and services. (Crude oil, in the ground; etc.)
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Define: Capital
Natural resource that has been produced into something else. (Early weapons, machines in auto shop.)
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Define: Labor
- Raw, unskilled labor.
- *Human Capital: no longer considered labor after education, training, experience.
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Define: Technology
- Knowledge that can be applied to the production
- of goods and services
- · Not necessarily robot/machines; Eli Whitney’s cotton-gin is technology
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Define: Entrepreneur
Seeks to make profits by finding new ways to organize the factors of production
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Define: Absolute Advantage
The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group
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Define: Comparative Advantage
- The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.
- Comparative advantage is about relative opportunity cost
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Define: Opportunity Cost
The loss of potential gain from other alternatives when one alternative is chosen.
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