Wednesday, August 10, 2016

intro to economics (notes)

what is economics? 
the study of how people seek to satisfy needs & wants by making choices

why do choices have to be made?
  • scarcity of resources- is the basis of economics
  • basic economic problems- leads to shortage of goods & services
the basics:
  • scarcity- permanent problem we face w "factors of production"
  • shortage- temporary situation, can find new/recover "factors of production"
factors of production:
  • land- materials found in nature
  • labor- effort someone devotes to a task & they're paid
  • capital- human made resources used to produce other goods or services  
-human capital: special training that makes you economically "special"
-physical capital: good that helps produce other goods or services
-technology: advances in process to make a good or service
  • entrepreneur(ship)- people who take risks to combine land, labor, & capital to create new goods/services
trade offs: 
all choices given when choice is make

opportunity cost: 
the best or most valued alternative that is given up when choice is made

production possibility frontier: combination of goods produced utilized to full potential

in the face of scarcity, countries use:
  • development of cheaper or substitute resources
  • specialization of labor
  • mass production
6 basic economic goals:
  • economic efficiency- maximize resources
  • economic freedom- get to choose profession, what to buy, etc.
  • economic security- predictability
  • economic equity- fair distribution of wealth
  • economic growth- improve level of prosperity
  • full employment- provide jobs
market economy:
no government interaction in economy

factor market:
money flows from firms to households
businesses purchase factors of production (raw materials) to make finished products
households sell factors of production for income

product market:
money flows from households to firms for finished goods
businesses sell goods & services for a set price
individuals in households purchase goods & services

mixed economy:
government plays an active role in economy

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