Chapter 1: Introduction to Economics

2a) Described the four factors of "CELL" involved with economics, in terms of C.

C-Capital: These are the resources necessary for production. Physical Capital - the stock of equipment, machines to produce goods. Human Capital - the knowledge and skills acquired by education and experiences to produce goods.

2b) Described the four factors of "CELL" involved with economics, in terms of E.

E-Entrepreneurship: Effort used to coordinate factors of production (natural resources, labor, physical and human capital, to produce and sell products. This is where an Entrepreneur comes up with an idea.

5b) Explain Economics Thinking, in terms of the second element, "Isolate Variable-Ceteris Paribus".

Economic analysis often involve Variables and how they affect one another. A variable is a measure of something that can take on different values. "Ceteris Paribus" - The idea that other variables are fixed or do not change.

5c) Explain Economics Thinking, in terms of the third element, "Thinking at the Margin".

Ex: Milk is at $1.50 today. It goes to $1.80 three days later. Some will buy the milk while others will stop buying it. But very few will stop drinking altogether. Thinking at the Margin - When circumstances change slightly, people's actions will be affected as well.

3b) What are the three economic questions when societies make economic decisions at different levels, individuals, firms, and governments, in terms of H?

How: How do we produce the products? Alternative means of products in order to minimize cost.

4) Explain Economic Models with an example.

It is a simplified representation of an economics environment allowing the focus to be on one issue at a time. It helps economists to explore the decisions people make and the consequences of these things. Ex: Creating a scale model to build a new facility but showing only the exterior features and not the interior features.

2c) Described the four factors of "CELL" involved with economics, in terms of L.

L-Labor: Physical and mental effort people use to produce goods and services.

2d) Described the four factors of "CELL" involved with economics, in terms of L.

L-Land: (Natural Resources): These are the resources provided by nature and used to produce goods and services. Ex: water, oil, timber, etc.

6) Distinguish between "Macroeconomics" and "Microeconomics".

Macroeconomics: Study of the nation's economy as a whole as it focuses on the issues of inflation, unemployment and economic growth. Microeconomics: Study of choices made by households, firms, and governments and how these choices affect the markets for goods and services.

5d) Explain Economics Thinking, in terms of the fourth element, "Rational People Respond to Incentives".

People act "Rationally" - meaning they act in their own self interest. People are not motivated exclusively by self interest, but rather than self interest is more powerful than other motivation.

7) Distinguish between "Positive Analysis" and "Normative Analysis".

Positive Analysis: FACT; these predict the consequences of alternative actions by answering questions like: What is? What will be? Normative Analysis: OPINION; these look at questions like: What should be? What ought to be?

1) Define "Economics".

The study of allocating limited resources to satisfy unlimited needs. There are certain factors involved.

5a) Explain Economics Thinking, in terms of the first element, "Using Assumptions to Simplify".

These models allow us to understand the decision making of firms, individuals, and other organizations and to analyze them as well. Thus, Economics use assumptions to make things simpler and focus attention on what really matters, just like the previous mentioned example.

3a) What are the three economic questions when societies make economic decisions at different levels, individuals, firms, and governments, in terms of W?

What: What products do we produce? Since we can not produce all the items we might need, we still need to decide which ones are the necessary, however the more we produce of one item ,the less we will produce others.

3c) What are the three economic questions when societies make economic decisions at different levels, individuals, firms, and governments, in terms of W?

Who: Who consumes the products? Looks at the distribution of the products of society.