Economics
study of scarcity (of choice)
Land
natural resources into a good
labor
effort a person devotes
capitol
physical: human made resource to create goodshuman: skills and knowledge
Entrepreneurship
leaders that combine other factors to make goods
Entrepreneur
1. take the initiative2. provide value to others3. take the risk
micro-
study of small Econ. units like individuals, firms, and markets
macro-
Econ. as a whole
Postive statements
based on facts
normative statements
includes value judgements (what ought to be)
trade-offs
all alternative that we give up when making a choice
opportunity cost
most desirable alternative given up when making choice
Explicit cost
out of pocket monetary payments
implicit cost
opportunity cost of a decision
law of diminishing marginal utility
as you consume more the satisfaction diminishes
marginal analysis
making decisions based on increments
scarcity
society has unlimited wants but limited resources
self interest
goal is to maximize satisfaction
economy is
analyzed through graphs and model
MB=MC
is the sweet spot
3 questions
1. what goods/service can be provided2. how should goods/service be produced3. who consumes these goods/services
economic system
used by society to produce/distribute goods/services
type of economic systems
traditional command economy grew market and mixed economy
traditional
-centered around tribe/family-hunter/gather-only produce what's needed-bartering-evolve once settled
command
-gov.t controlled resources-gov.t answers questions
good about communism
1. low unemployment2. great job security3. less income inequality4. "free" health care
bad about communism
1.no incentive to work2.no innovation3.no competition=low quality good4.corrupt leaders5.few individual freedoms
reason why communism fail
shortage of goods that consumers want, produced at highest prices and lowest quality
free market
1.little gov.t involvement2.individuals own resources and answer question3.profit gives incentive 4.wide variety of goods5. competition and self-interest
the invisible hand
society's goal will be met as individuals seek self-interest(Adam smith)
mixed economy
1.individuals own resources2.gov.t regulates production/distribution of goods/service3.indiviuals and gov.t answers questions