Chapter 1 Flashcards
Scarcity
The resources we use to produce goods and services are limited
Economics
the study of choices when there is scarcity
Factors of Production
the resources used to produce goods and services; also known as production inputs or resources
Natural Resources
resources produced by nature and used to make goods and services
Labor
Human effort, including both physical and mental effort, used to produce goods and services
Physical Capital
the stock of equipment, machines, structures and infrastructure that is used to produce goods and services
human capital
the knowledge and skills acquired by a worker through education and experience and used to produce goods and services
entrepreneurship
the effort used to coordinate the factors of production - natural resources, labor, physical capital, human capital - to produce and sell products
Positive analysis
Answers the question “What is?” or “What will be?”
Normative analysis
Answers the question “What ought to be?”
Economics model
A simplified representation of an economics environment, often employing a graph
Variable
a measure of something that can take on different values
ceteris paribus
A Latin expression meaning the other variables are held fixed
Marginal Change
a small, one unit change in value
Macroeconomics
The study of the nation’s economy as a whole; focuses on the issues of inflation, unemployment, and economic growth
Microeconomics
the study of the choices made by households, firms and government and how these choices affect the markets for goods and services
What are the factors of production?
- Natural resources
- Labor
- Physical capital
- Human capital
- Entrepreneurship
What are the three key economic questions?
- What products do we produce?
- How do we produce the products?
- Who consumes the products?
What are the economic ways of thinking?
- Use assumptions to simplify
- Isolate Variables - ceteris paribus
- Marginal thinking
- Rational people respond to incentives
What are the three ways to use macroeconomics?
- Understand why economies grow
- Understand Economic Fluctuations
- Make informed business decisions
What are the three ways to use microeconomics?
- Understand Markets and Predict Changes
- Make Personal and Managerial Decisions
- Evaluate Public Policies
