Chapter 1 Introduction: What Is Economics?
Variable
A measure of something that can take on different values
Economin 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 it be?"
Normative analysis
Answers the question "What ought to be?"
Physical capital
Equipment
Labor
Physical and mental effort people use to produce goods and services
Natural resources
Produced by nature
What institutions play key roles in economic growth?iii
Regulatory and legal
Scarcity
Resources are limited
Ceteris paribus
The Latin expression meaning that other variables are held fixed
Entrepreneurship
The effort used to coordinate the factors of production to produce and sell products
Human capital
The knowledge and skills acquired by a worker through education and experience
Factors of production
The resources used to produce goods and services
Economics
The study of choices we make when there is scarcity
Microeconomics
The study of the choices made by households, firms, and govt, and how these choices affect the markets for goods and services
Macroeconomics
The study of the nation's economy as a whole; focuses on issues of inflation, unemployment, and economic growth
What are the three basic questions a society must answer?
What products do we produce? How do we produce the products? Who consumes the products? (What, how, who)