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Economics
Social Science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants
Scarcity
we have unlimited wants but limited resources
Microeconomics
Study of small economic units such as individuals, firms, and markets
Macroeconomics
Study of the large economy as a whole or economic aggregates
Theoretical economics
Economists use the scientific method to make generalizations and abstractions to develop theories
Policy economics
Theories are applied to fix problems or meet economic goals.
Positive statements
Statements based on facts and avoids value judgments
Normative Statements
Includes value judgements
What are the 5 economic assumptions
1.Society has unlimited wants but limited resources.
2.Due to scarcity, choices must be made; every choice has a cost
3. Everyone’s goal is to make choices that maximize their satisfaction
4.Everyone’s makes decisions by comparing marginal costs & marginal benefits of every choice
5.Real life situations can be explained and analyzed through simplified models and graphs
Marginal=
Additional
Marginal analysis
Making decisions based on increments
Trade offs
All the alternatives that we give up when we make a choice
Opportunity cost
Most desirable alternative given up when you make a choice
Price
Amount seller pays to produce a good
Cost
Amount seller pays to produce a good
Investment
The money spent by businesses to improve their production
Consumer goods
Created for direct consumption (ex:pizza)
Capital Goods
Created for indirect consumption (ex:oven)
Goods used to make consumer goods
