Macroeconomics 1.1
Marginal analysis
making decisions based on increments
Investment
money spent by businesses to improve their production
Opportunity cost
most desirable alternative given up when you make a choice
Consumer goods
goods created for direct consumption
Capital goods
goods created for indirect consumption (used to make consumer goods)
Physical capital
any human-made resource that is used to create other goods and services
Human capital
any skills or knowledge gained by a worker through education and experience
Policy economics
applying theories to fix problems or meet economic goals
Ceteris paribus
hold everything else constant
Labor
any effort a person devotes to a task for which that person is paid
When the marginal cost exceeds the marginal benefit
At what point does something become irrational?
Land, labor, capital, and entrepreneurship
What are the 4 factors of production?
1. Society has unlimited wants and limited resources, 2. Choices must be made due to scarcity and every choice has a cost, 3. Everyone acts in their own "self-interest", 4. Everyone makes decisions on the margin, and 5. Real life situations can be explained/analyzed through simplified models/graphs
What are the 5 key economic assumptions?
Productivity
a measure of efficiency that shows the number of outputs per unit of input
Marginal
additional
Land
all natural resources used to produce goods and services
Trade-offs
all the alternatives we give up when we make a choice
Entrepreneurship
ambitious leadership that combine the other factors of production to create goods and services
Allocate
distribute
Utility
satisfaction
Economics
social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants (study of how individuals, firms, and governments deal with scarcity)
Entrepreneur
someone who takes initiative, innovates, and acts as a risk bearer so they can obtain a profit
Positive statements
statements based on facts; avoids value judgements
Normative statements
statements involving value judgements
Microeconomics
study of small economic units like individuals, firms, and markets; deals with supply and demand in specific industries, production costs, and labor markets
Macroeconomics
study of the large economy as a whole or economic aggregates; deals with economic growth, government spending, inflation, unemployment, and international trade
Price
the amount a buyer/consumer pays
Cost
the amount a seller pays to produce a good
Theoretical economics
using the scientific method to make generalizations and abstractions to develop theories