Introduction to Macroeconomics

Macroeconomics- study of major components of the economy
Microeconomics- study of how household informs, makes decisions, and how they interact with the market

Positive Economics- claims to be very descriptive
Normative Economics- claims that attempts to describe how the world should be

Needs- Basic requirements for survival
Wants- Desires

Scarcity-Fundamental economic problem that all societies face satisfying unlimited wants with limited resources
Shortage- Situation where quantity demanded is greater than quantity supplied

Goods- tangible, bought, sold, traded, can't be produced
Services- work that's performed for someone else

Consumer Goods- goods that are intended for final use by consumer
Capital Goods- items used in the creation of other goods

Factors of Production
1. Land
2. Labor
3. Capital
4. Entrepreneurship

Trade-Offs- alternatives that we choose when giving up one course of action or another
Opportunity Costs- choosing our next best alternative

Production Possibility Curve- shows the most that society can produce if it uses every available source to the best of its ability

Production Possibility Graph
 If point is on the production possibility curve it's efficient and attainable
 If point is inside the curve it's attainable but inefficient. Causes can be recession, war/famine, underemployment, drop in population.
If point it's outside the curve it's unattainable. Causes can be economic growth, new technology, discover new resources.


PPC Key Assumptions
1. 2 Goods Produced
2. Full Employment
3. Fixed Resources
4. Fixed State of Technology
5. No International Trade