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Economics
The study of how people use their scarce resources to satisfy their unlimited wants
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Resources
The inputs used to produce the goods and services that people want
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Four Catagories of Resources
- -Labor
- -Capital
- -Natural Resources
- -Entrepreneurial Ability
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Labor
The physical & mental effort used to produce goods & services. (Time)
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Capital
The buildings, equipment, & human skills used to produce goods & services. (Physical vs. Human)
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Natural Resources
All "gifts of nature" used to produce goods & service. (Renewable vs. Exhaustible)
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Entrepreneurial Ability
Managerial & organizational skills needed to start a firm, combined with the willingness to take the risk of loss or profit.
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Markets
the means by which buyers and sellers carry out exchange
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Product Market
Where goods and services are bought and sold
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Resource Market
where resources are bought and sold
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Rational Self-Interest
- -Maximize benefit
- -Minimize cost
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Marginal Analysis
Economists analyze marginal choices, those that are incremental, additional, or extra.
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Microeconomics
Studies behavior in particular markets
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Macroeconomics
Studies behavior of entire economies
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Economic Theory/Model
Simplification of reality used to predict real world cause/effect
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Ceteris Paribus
Assumption that other variables remain unchanged
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Positive Economics
What is
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Fallacy of Association
The incorrect belieft that correlations equals causation
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Fallacy of Composition
The incorrect belieft that what is true for the individual is true for the group
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Secondary Effects
Not taking into account the unintended consequences of economic actions/policy
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