Introduction to Economics

goods and bads

Economists talk about __________ and __________

Good

anything that gives a person utility

Utility

satisfaction

Bad

something that gives a person disutility

Resource

needed to produce goods, sometimes referred to as inputs or factor of production

General Categories of Resources

land, labor, capital, entrepreneurship

Land

includes natural resources

Labor

physical and mental talents distributed by people

Capital

produced goods that can be used as further input

Entrepreneurship

the talent that some people have for organizing the resources of land, labor, and capital for production

Scarcity

condition in which our wants > limited resources available to satisfy those wants

Economics

the science of scarcity

Effects of scarcity

- need to make choices

- need for a rationing device

- competition

Rationing Device

means of deciding who gets what of available resources and goods

Opportunity Cost

whatever you would have chosen, sacrifice

Marginal Benefits

additional benefits, pros

Marginal Costs

additional costs, cons

Efficiency

condition when pros are equal to the cons

Incentive

something that encourages or motivates a person to undertake an action

Exchange / Trade

the giving up of one thing for something else

Positive Economics

- attempts to determine "what is"

- deals with cause-effect relationships that can be tested

Normative Economics

- addresses "what should be"

- deals with value judgements and opinions that cannot be tested

Microeconomics

deals w human behavior and choices related to small units

(behavior of an individual, firm, industry, or single market)

Macroeconomics

deals w human behavior and choices as they relate to entire economy

(inflation, unemployment rate, changes interest rates, govt spending, taxes)

Ceteris Paribus

latin, "all other things constant," "nothing else changes"

- compares one factor vs another Only without considering other factors