Chapter 1: What is Economics

Economic growth reduces ______

poverty

Define: What are the three key Economic Q's?

1) What products do we produce? 2) How do we produce the products? 3) Who consumes the products?

Define: variable

A measure of something that can take on different values.

Define: Economic Model

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

Define: Marginal change

A small, one-unit change in value (if i keep 1 more hour, by how much revenue inc?)

Define: Normative Analysis

Answers the question that is normative by nature: "what ought to be?"

(2 factor) define: labor

Human effort, including both physical and mental effort, used to produce G+S.

Define: Positive Analysis

Predicts the consequences of alternative actions by answering, "what is?" or "what will it be?"

(1 factor) define: Natural Resources

Resources provided by nature and used to produce goods and services. (oil, water, land)

Define: Macroeconomics

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

(5 factor) define: Entrepreneurship

The effort used to coordinate the factors of production- natural resources, labor, physical capital, human capital- to produce and sell products.

(4 factor) define: Human Capital

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

Define: Ceteris Paribus

The latin expression meaning that other variables are held fixed.

Define: the factors of production

The resources used to produce goods and services (aka: product inputs, resources)

Define: Scarcity

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

(3 factor) define: Physical Capital

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

Define: Economics

The study of choices when there is scarcity.

Define: Microeconomics

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

Why make assumptions?

We make assumptions to simplify and focus attention on what really matters. Seattle to san fran example, car doesnt matter about hills but bike does.