Microeconomics

study of small economic units, such as individuals, firms, and markets

Supply and demand in specific industries, production costs, labor markets

Macroeconomics

Study of the large economy as a whole or economic aggregates

Economic growth, government spending, inflation, unemployment, international trade

Positive statement

What is = Based on facts, Avoids value judgments

Government-provided healthcare increases public expenditures

Normative Statement

What ought to be = Includes value Judgments

Women should earn the same salary as men.

Economics

Study of how individuals and societies deal with Scarcity.(Social Science concerned with efficient use of scarce resources to achieve maximum satisfaction of economic wants.)

Macro & micro-economic

Scarcity

unlimited wants but limited resources ( unable to have everything we desire)

Limited oil reserves

Marginal Analysis

Marginal = additional

making decisions based on increments

(You will continue to do something as long as the marginal benefit is greater the marginal cost)

when you decide to go to the mall, you consider the additional benefit and additional cost (your opportunity cost)

Trade- offs

ALL the alternatives that we give up when we make a choices

College;

Trade-off = military, gap year, community college, Job

Opportunity Cost

Most desirable alternative given up when you make a choice

Next best thing

College;

Making more money

Utility

satisfaction

/

Allocate

Distribute

/

Price

Amount Buyer ( consumer) pays

At groceries what the person buying the oranges will pay

Cost

Amount seller pays to produce a good

the manager pays to get the oranges to the store will pay

Consumer goods

created for direct consumption

pizza, pasta, drinks

Capital goods

created for indirect consumtion

oven, blender, knives

Physical capital

Any human-made resources that is used to create other goods and service

tools, tractors, machienry

Human capital

Any skill or knowledge gained by a worker through education and experience

communication skills, Creativity

Productivity

A measure of efficiency that shows the number of outputs per unit of input

Bob= 10 pizzas in 1 hr

stan = 5 pizzas in 1 hour

Bob is more productive

Production Possibiities Curve (PPC)

a model that shows alternative ways that an economy can use its scarce resources

Demonstrates scarcity, trade-offs, opportunity costs, and efficency

Ineffecient/ unemployment

inside the curve

not using all resources

emploies are not working on task

Unattainable/Impossible

Outside the curve

Can’t have enough stuff to work with

not enough resources

Efficent

On the curve

Exact resources

Enough resources to use

Constant opportunity cost

Resources are easily adaptable for producing either good

In straight line (not common)

Law of increasing opportunity costs

As you produce more of any good, the opportunity cost will increase

resources are not easily adaptable to producing both goods

Absolute Advantage

The producer can produce the most output or requires the least amount of inputs (resources)

Papa Johns has absolute advantage in pizza because he can produce 100 and Ronald can only make 20

Comparative Advantage

The producer with the lowest opportunity cost

Ronald has a comparative advantage in burgers because he has a lowest Per unit Oppurtunity cost

Output Question

The amount of input is same for all countries (time, workers or other resources) ONLY the OUTPUT of each country is different

using the same amount of workers the US. produces 10 planes, and China can produce 3 planes

Input Question

The amount of output (Like cars, planes, or corn) are the same for both countries. ONLY the INPUT for each country is different

The US. takes 20 Workers to produce ONE plane. China takes 40 workers to produce 1 plane

Terms of Trade

Both Countries can benefit from trade if they each have relatively lower opportunity costs. agreed on one conditions that would benefit both countries

trade 1 ton of wheat for 1.5 ton of sugar