Macroeconomics Unit 1

Economics

Is the study of how people and societies use limited resources to satisfy unlimited wants.

Macroeconomics

study of large economy as a whole or economic aggregates

Scarcity

a condition that exists when unlimited need/wants exceed the limited available resources and forces individuals and societies to make choices about resource allocation. (PERMANENT)

Shortage

When supply doesn’t meet demands (temporary)

Trade offs

refers to all alternatives you give up when making a descion

Opportunity cost

is the value of the next best alternative that you give up when you make a decision. It’s what you sacrifice in order to choose something else. (Trade-off leads to______)

Price

Amount buyer (or consumer) pays

Cost

Amount seller pays to produce a good

Investments

The money spent by businesses to improve their production

Consumer Goods

Created for direct consumption by consumer.

Capital Good

Created for indirect consumption tools/ resources to produce goods for future consumption

Utility

Personal Satisfaction

Marginal

Means Additional

Allocation

To distribute

Natural Resources (Land)

Items from nature that we use to produce goods and services

Human Resources (Labor)

People involved in the production of goods and services.

Human capital

Abilities someone brings to the production process

Physical capital

Tools machines and structure used over and over again in the production of goods and services

Entreprenuership

Bring resources together in an innovative way to produce a produc

Profit

Revenue - Cost

Productivity

Measure of efficiency that shows the number of outputs per unit of input.

Theoretical economics

Economics use the scientific method to make generalizations and abstractions to develop theories

Policy economics

Theories are then applied to fix problems or meet economic goals.

Marginal Thinking

making decision based on increments.

Marginal Benefit

is the additional gain or satisfaction a person gets from consuming or doing one more unit of something

Marginal cost

is the additional cost or effort of producing or consuming one more unit of something

Production Possibility Curve (Frontier)

Is a model that shows alternative ways that an economy can use its scare resources.