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 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
