ECON - Chapter 1 (What is Economics?)

economic model

An economic model is a description of some aspect of the economic world that includes only the factors that are needed for the purpose at hand.

Factors of Production

Land, Labor, Capital, and Entrepreneuship

Macroeconomics

Macroeconomics is the study of the performance of the national economy and the global economy.

Microeconomics

Microeconomics is the study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments.

Efficiency

Resource use is efficient if it is not possible to make someone better off without making someone worse off.

What is economics?

Economics is the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices.

6 Key Ideas in Economic Thinking

1. A choice is a tradeoff. 2. People make rational choices, comparing costs and benefits. 3. Benefit is what you gain from something. 4. Cost is what you must give up to get something. 5. Most choices are "how much" choices; they are made at the margin. 6. Choices respond to incentives.

What does each FOP earn?

1. Land earns rent. 2. Labor earns wages. 3. Capital earns interest. 4. Entrepreneurship earns profit.