economics 2.1- factors of production/resources

How do economics theories work in reality?

simplify problems, simplify assumptions, rationalize self interest, establish universal theories, economists tell stories, normative vs positive statements

making assumptions and simple conclusions

Simplifying problems in economic theories means

looking at variables like sale and price as constants

Simplifying assumptions in econmics theories means

behavior based; people make decisions based on max benefit or minimum cost (people aren’t always rational but in economics it is assumed they are)

rationalizing self-interest in economic theories means

everyone has theories whether poor or understood; good theories guide understanding, organization ,and storage in the world

universal theories in economic theories means

economists explain their theories through stories such as case studies, anecdotes, and parables supported with data

storytelling economists in economic theories means

Normative Statements

as statement that reflects opinion on how things SHOULD work

Positive Statements

reflects WHAT is; fact

Marginal Analysis

a method of comparing the costs and benefits of an activity to help determine if it's worth doing

Example of marginal analysis

buy 2, get 1 free deal vs just buying 1: is it worth it?

greater

Rational decision require changing status quo/economic variable if the marginal benefit is ___ than the marginal cost

down (\)

The visual graph representation of a marginal benefit goes ______

up (/)

The visual graph representation of a marginal cost goes ______

individuals

Who decides the opportunity cost of a product/situation?

alternatives

Opportunity cost varies based on ___

When calculating opportunity cost, you ignore ____ and consider ___

sunk costs; time

demand and supply

In markets, ___ and ___ determine __ price and quantity

the quantity, quality, and prices of goods/services

What do markets provide information about?

-Demand the goods and services produced

-Own resources and supply resources used by firms to produce goods and services TO households

The role of households in the economy

Demand the resources households supply

-Use the resources acquired to supply good sand services back to household demand

The role of firms/gov/rest of world in economics

Human resources, Natural resources, Capital goods

Types of productive resources

Human Resources

broad category of physical and mental efforts used to produce goods and services

Labor

a type of human resourc that refers to the physical and mental effeortufl used to produce goods and services

Entreprenaurship

a type of human resoruce; a person who develops a newproduct or process orfound a better way to produce an existing product

Natural Resources

land; used to produce goods and services

Capital Goods

human creation used to produce goods and services

Factors of Production named

land, labor, capital, entreprenaurship

things required to make a good/service

What are the factors of production used for?

Yes

Does production always cost something?