MicroEconomics

Microeconomics

the study of how individuals (consumers, workers, and firms), interact to generate outcomes in specific markets.

Macroeconomics

The study of the economy as a whole (production, employment, prices, and policy, nationwide).

Production Possibilities Curve

A graph that shows all combinations of two goods or categories of goods an economy can produce with fixed resources.

Inside the curve

Inefficient because the economy is not fully utilizing its resources.

Outside of the curve

Not possible because it exceeds the amount of resources available,

Bowed out PPC

Opportunity costs increase as the production of either good increases.

Straight line PPC

The resources used to produce one good will be easily converted to the production of the other good.

Trade offs

All the other choices that are given up when you make a choice.

Opportunity cost

Second best option you lose out on when you make a choice.

Scarcity

Tension between infinite wants and limited resources.

Positive statement

Fact based statement that avoids judgement.

Normative statement

Includes value judgements (suggestion, opinion, sounds political)

Comparative Advantage

Comparative Advantage is the ability of one entity to produce a good or service at a lower opportunity cost than another entity.

Absolute Advantage

The ability of one entity to produce more of a good or service with fixed resources, or the same amount with fewer resources than another entity.

Input

Resources used in production (labor, materials, capital,)

Output

finished goods as a result of production.

Constant Opportunity Cost

Resources are easily adaptable for producing either good.

Per Unit Opportunity Cost

cost/benefit

Productive Efficiency

Products are being produced in the least costly way.

Alternative Efficiency

The products being produced by society depend on what the consumers wants.

Four factors of fixed resources

Land, Labor, Capital, and entrepreneurship.

1st Shifter of the PPC

Change in resource quantity or quality.

2nd Shifter of the PPC

Change in technology.

3rd Shifter of the PPC

Change in trade.

4th Shifter of the PPC

Change in education.