What is Microeconomics? Chapter 1
What are the 3 methods of resource allocation?
1. Command: Central authority (Like North Korea) 2. Tradition: used mostly in tribal societies. Orderly and stable. 3. The market: Do what you want with whatever you have
What are resources? (4 types)
1. Labor, 2. Land, 3. Capital, Entrepreneurship
Scarcity
A situation in which the amount of something available is insufficient to satisfy the desire for it.
Capital
Long lasting tool that labor uses to produce goods and services
Opportunity cost =
Economics - Cost
Opportunity cost includes?
Explicit & Implicit Costs
Implicit Costs
The value of something sacrificed when no direct payment is made. Same as foregone earnings
What is opportunity cost?
What you have to give up when you make a choice.
model
abstract representation of reality
normative economics
providing advice and solutions based on economics
Foregone earnings:
Money you would be making with your time, if you weren't wasting it doing this other task.
What are the 2 types of capital?
Physical Capital and Human capital
Capital Stock
The total amount of capital in a nation that is productively useful at a particular time.
Resource Allocation
What is produced? How is it going to be produced? Who gets the goods & services we produce? How do we allocate these resources?
Economics
study of choice under conditions of scarcity.
Microeconomics
take a smaller more individualistic approach to economics
Macroeconomics
take an overall view of the economy
Positive economics
the study of how economics works