Introduction: What Is Economics?

*Notion of Scarcity*

"We can't have it all; there are trade-offs." (pg. 3)

*The 3 Economic Questions*

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

Ceteris Paribus

A Latin expression meaning that other variables are held fixed.

Variable

A measure of something that can take on different values.

Negative Relationship

A relationship in which two variables move in opposite directions.

Positive Relationship

A relationship in which two variables move in the same direction.

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 people, used to produce goods and services.

Natural Resources

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

Entrepreneurship

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

Human Capital

The knowledge and skills acquired by a worker through education 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 of 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  households, 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.

Slope of a Curve

The vertical difference between two points (the rise) divided by the horizontal difference (the run).