BASIC ECONOMIC PRINCIPLES

Macroeconomics vs. Microeconomics

Microeconomics- the study of individual parts of the economy (looking at the tree instead of the forest) 

• Macroeconomics- the study of the economy as a whole (everything from GDP, etc,)

Positive vs. Normative Economics

• Positive claims attempt to describe the world as is( example-minimum wage laws causes unemployment....fact-based)
• Normative claims that attempt to prescribe how the world should be(example-the government should raise the minimum wage....opinion-based)

Scarcity vs. Shortage

• Scarcity is the fundamental economic problem that all societies face (how to satisfy unlimited wants with limited resources).
• Shortage-exist when QD (quantity demanded) > QS (quantity supplied)

Capital Goods vs. Consumer Goods

• Capital Goods- Items used in the creation of other goods
• Consumer Goods- Goods that are intended for final use for the consumer
• Services- Work performed by one person for another

Factors of Production

• Factors of production
• 1.Land
• 2.Labor 
• 3.Capital (human and physical) 
• 4.Entrepreneurship
• 3) Human capital- the knowledge and skills a worker gains from education and experience
• 3) Physical capital- human-made objects used to create other goods and services
• To be an entrepreneur you have to be a risk-taker and an innovator