macroeconomics - study of the entire economy
microeconomics - study of parts of the economy
how households & firms make decisions and how they interact in markets.
2.
positive economic - claims that attempt to describe the world as is. very descriptive.
EX. minimum wage laws causes unemployment.
normative economics - claims that attempt to prescribe how the world should be.
EX. government should raise minimum wage.
3.
needs - basic requirements for survival
wants - desires of citizens. much more broader than your needs.
scarcity - most fundamental economic problem that all societies face. [trying to satisfy unlimited wants with limited resources.]
shortages - situation where quantity demanded is greater than quantity supplied. [shortages are temp.]
4.
good - tangible commodity. can be sold, traded, etc.
consumer goods - goods intended for final use by the consumer.
EX. candy bar, vehicle, etc.
capital goods - items used in the creation of another good.
service - work that is performed
5.
factors of production
1. land - natural resources
2. labor - work force
3. capital - physical capital [human made objects used to create other goods. EX: building, tools, etc.] human capital [ knowledge and skills gained through work and education.]
4. entrepreneurship - innovative: risk takers
trade-offs: alternatives that we give up whenever we choose one course of action over another.
opportunity cost: the most desirable alternative given up by making a decision.
"guns or butter": where is the government putting our resources. EX: US puts resources into the military. guns = military; butter = agriculture
production possibility graph: shows alternative ways to use resources.
ABCDEF - on the curve.
G - inside the curve. [famine, war, recession, population decrease, underemployment/unemployment]
H - outside the curve. [growth of technology, econ. growth, discover new resources]
production possibilities graph key assumption:
1. two goods are produced (consumer/capital goods)
2. full employment [4%-5% unemployment; 80% factory productivity.]
3. fixed resources (land, labor, capital, & entrepreneurship)
4. fixed state of technology
5. no international trade
Very nice blog post, I really liked how you not only included a diagram in order to show the production possibilities graph but also the fact that you labeled each of the points with G being a result of (famine, war, unemployment) and H being (technology, new resources.
ReplyDelete