Econ Unit 1

What Is Economics

The study of scarcity and the choices people make to solve it

The Problem of Scarcity

Unlimited wants and needs and limited resources

The Economy

The Gross Domestic Policy (GDP); market value of services produced in a year

Who is Adam Smith

The writer of “The Wealth of Nations”: a book analyzing the logistics of economics and creator of the “The Invisible Hand”

Macroeconomics

The study of the entirety of economics

Microeconomics

The study of one persons decision making

“There’s no such this as a free lunch”

Nothing in this world is free and everything has a value

How to deal with Scarcity

By making choices

Shortage

A temporary limitation on a resource that can be fixed with time

What type of analysis is used in every decision

cost/benefit analysis

Opportunity Cost

“What would you have done, if you didn’t make the choice you did?”

Marginal Analysis

Deciding whether the additional benefit outweighs the additional cost

3 Key Questions

Who (consumes the goods), What (goods are produced), How (should the goods be produced)

What are the 2 economic extremes

Command Socialists Economics (100% Government involvement) & Market Capitalists Economics (0% Government involvement)

Big 3 of Economics

Stable pricing, High Employment, Economic Growth

What is inflation

The average price of living goes up and the value of money goes down

What is deflation

The average price of living goes down and the value of money goes up

What is a market

An exchange

Why do markets exist

To fix the problem of scarcity

Basic characteristics of a marketplace

Privateproperty, Individual freedom, Competitive markets

What is a good

A tangible item that can be acquired

What is a service

An intangible action

What are the factors of production

Land, Labor, Human Capital, Physical Capit

What is Land

The natural resources used to create goods

What is Labor

Working in exchange for pay

What is Human Capital

The education and training to preform a task

What is Physical Capital

The factories, machines, and tools used to create a product

What are the characteristics of an entrepreneur

An organized risk taker

Why are capital deepening and innovation so important

The help better life and the progression of businesses

Why is investment in human capital important

More people will benefit, making them more successful so they can contribute to the economy