1 | Introduction: What is Economics?

Five factors of production

1. Natural Resources 2. Labor 3. Physical capital 4. Human capital 5. Entrepreneurship

Variable

A measure of something that can take on different values.

Economic Model

A simplified representation of an economic environment, often employing a graph.

Marginal Change

A small, one-unit change in value.

Positive Analysis

Answers the question, "What IS?" or "What WILL be?"

Normative Analysis

Answers the question, "What ought to be?"

Labor

Human effort, including both physical and mental effort, used to produce gods and services.

Ceteris Paribus

Other variables are held fixed. All variables held constant.

Natural Resources

Resources provided by nature and used to produce goods and services.

Entrepreneurship

The effort used to coordinate the 5 factors of production, to produce and sell products.

Human Capital

The knowledge and skills acquired by a worker through eduction and experience and used to produce goods and services.

Factors of production

The resources used to produce goods and services; also known as production inputs or resources.

Scarcity

The resources we use to produce goods and services are limited.

Physical Capital

The stock equipment, machines, structures, and infrastructure that is used to produce goods and services.

Economics

The study of choices when there is scarcity.

Microeconomics

The study of the choices made by house holds, firms, and government and how these choices affect the markets for goods and services.

Macroeconomics

The study of the nation's economy as a whole; focuses on the issues of inflation, unemployment, and economic growth.