Economics Chapter 2 (Always Updating)

circular-flow diagram

a visual model of the economy that shows how dollars flow through markets among households and firms

production possibilities frontier

a graph that shows the combinations of output that the economy can possibly produce with the available factors of production and production technology

microeconomics

the study of how households and firms make decisions and how they interact in markets

macroeconomics

the study of the economy-wide phenomena, including inflation, unemployment, and economic growth

positive statements

claims that attempt to describe the world as it is

normative statements

claims that attempt to prescribe how the world should be

Labor, land, capital

factors of productions

observation, developing a theory, more observation

scientific method in economics

points outside

currently unattainable within your existing resources and tecnology

points inside

Resources aren’t being used efficiently; less than their full potential of its available resources