Basic Concepts of Economics
Macroeconomics vs. Microeconomics
Macroeconomics: The study of the the economy as a whole.
- Inflation
- Minimum Wage
- International Trade
Microeconomics: The study of individual or specific units of the economy.
- How households and firms make decisions and how they interact in markets
- Looking at specific thing (Ex: Supply and Demand)
Positive Economics vs. Normative Economics
Positive Economics: An attempt to describe the world as is.
- Very descriptive
- Collects and presents facts
Normative Economics: Attempts to prescribe how the world should be
- Opinion Based
Ex: "The government should increase minimum wage."
Needs vs. Wants
Needs: Basic requirements for survival
Wants: Desires
Scarcity vs. Shortage
Scarcity: The most fundamental economic problem facing all society
*Unlimited wants with limited resources
Shortage: Quantity demanded exceeds quantity supply
*Shortage is temporary, scarcity is permanentGoods vs. Services
Goods: Tangible Commodities
- Can be bought, sold, traded, and produced
Capital Goods: Items that are used in the creation of other goodsEx: Steel for a car
Consumer Goods: Intended for final use by the consumer
Ex: The actual car
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