Chapter 1 Key Concepts Flashcards
Production, Positive/Normative Statements
The study of the allocation of scarce resources to unlimited wants
Definition of Economics
Land, Labor, Capital
Economic resources of production
Decisions by firms, individuals, as well as single markets
Microeconomics Focus
the economy as a whole and explores economy wide issues such as unemployment, inflation, GDP, interest rates
Macroeconomics Focus
Productions decisions are made by a central authority deciding what and how to produce, that authority is most often the government. Roads, military, public schools…
Command Production
Production decisions are done by many buyers and sellers exchanging goods and services solely for their own personal benefits. Groceries, clothing, cars
Market Production
Production Decisions are made as the result of historical circumstance. Parents don’t have and take care of children to profit. They do so because that is the tradition. Children don’t care for parents in their old age due to profit motives but as a result of tradition. Raising Children, old age care, churches, private schools…
Traditional Production
All economies around the world have market, command, and traditional components
Mixed Market Economic Systems
Rationality implies that individuals make decisions based upon the extra unit. The water diamond paradox example can help to understand this concept.
Marginal Decision Making
Simplifications of ideas used to better understand economic topics
Economic models
An observation that can be hypothetically tested and is measurable
Positive Statement
An observation of value which cannot be tested and cannot be measured
Normative Statement
