Microeconomics Unit 1

rationality theory

everyone works in their own self interest (tends to benefit others anyway)

oppportunity loss

choosing one thing gets rid of your ability to do the other (you want this to be high as opposed to low)

absolute advantage

you’re flat out better at something

comparative advantage

you find what you’re best at, party does it with the least opportunity loss

Output

Maximize

Input

Minimize

Factors of production

Land, labor, capital: a country with more of these can operate more efficiently

Empirical economics

Provable by experience or math, the world as how it is not how it should be

Normative economics

Statements based on values and judgements, less scientific

Product Market

businesses sell goods and services, while households buy the goods and services

Factor Market

businesses buy the factors of production, land labor, and capital, while the people sell their labor to make income