Macroeconomics

• Macroeconomics - the study of major components of economy
• ex : inflation, supply and demand, wages, GDP
• Microeconomics - the study of how households and firms make decisions and how they interact with the market
• ex : supply and demand, market structure, businesses

• Positive Economics - claims that attempt to describe the world as it is, very descriptive and fact based
• ex : minimum wage laws cause employment
• reduction in force if there is an increase in minimum wage
• Normative Economics - claims that attempt to predict or prescribe how the world should be, opinion based
• ex : government should raise minimum wage
• TX - $7.25; if wage increases, the living cost increases as well

• Needs - basic requirements for survival
• ex : food, water, shelter
• Wants - desires of citizens, broader than needs

• Scarcity - limited
• fundamental economic problem that all societies face
• satisfy unlimited wants with limited resources
• ex : water, oil
• Shortage - situation where quantity demanded is greater than quantity supplied
• ex : when a place doesn't have what you want/need, so they go out to get more of is so they can satisfy you and keep you as their customer

• Goods - tangible commodity; bought, sold, traded, produced
1. Consumer Goods - goods that are intended for final use by the consumer
2. Capital Goods - items used in the creation of other goods such as factoring machinery and trucks
• Services - work that is performed for someone else
• ex: a Barber

Factors of Production :

1. Land - natural resources
2. Labor - work force
3. Capital -
• Human Capital - knowledge and skills a worker gains through education and experience
• ex : training on the job or in college
• Physical Capital - human-made objects used to create other goods and services
• ex : buildings and tools, factories
4. Entrepreneurship - product, inventive, and a risk-taker

• Trade-Offs - alternatives that we give up when we choose one course of action over another
• ex : there's no such thing as a free lunch
• Opportunity Cost - choosing the next best alternatives
• will exist as long as resource scarcity exists due to our endless wants and needs
• ex: choices you make when you don't get your first choice