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The
Science of
Economics
Microeconomics is the
branch of economics
that examines the
choices of individuals
concerning one product,
one firm, or one
Rindustry.
Macroeconomics is the
branch of economics
that examines the
economy at once.
behavior of the whole
A need is a basic
A want is a way of
requirement for
expressing a need.
shelter.
wants tend to be
broader than needs.
There
is no such thing as a
free lunch
Seemingl
y
Limite
d
Unlimite
d
Resources
Wants
SCARCITY
WHA
T
CHOICE
S
HO
W
To
To
FOR WHOM
To Produce
- 10 years old
30%
11 60 years old
50%
61 85 years old
20%
Food
Healthcare
?
?
100% You have a population
of
What to Produce
Should they produce
military goods or food?
How to Produce
Should they use
equipment and few
people or use more
people and less
equipment?
For Whom to
Produce
opportunities.
The trees in a virgin forest are land; in a cultivated
forest
R
A machine is wealth.
If used to produce shoes
or other wealth, the machine is wealth that is
capital (capital good).
So also would a
merchants stock (inventory) of goods in trade
be capital because the final exchange is not
been completed.
An entrepreneur is a risk-taker
the change in our economy.
of profits.
in search
creating
goods and we
services,
can
Note!! Everything
produce
require
these factors.
take
place.
Description
Describing Economic Activity
Analysis
Trying to determine why
something happens
Explanation
Using Economic theory to
explain how things work
Prediction
Using Economic events to
goods
service
provide
Wealth is the accumulation of products
satisfaction
that are
from
and transferable
where producers
Product Markets are
goods and services to
consumers.
sell their
are
Circular Flow
$
Supply
Purchases
Product Markets
Business
Consumer
Income
Spending
Goods &
Services
Businesses
Sell
Buy
Producti
Payments for
Resources
ve
Land, Labor
Capital
Entrepren
eurs
Resources
Income from
Resources
Factor Markets
R
Individuals
fewer
tasks than
before.
of
Specialization
takes
place when factors
they can
production perform tasks that
do
relatively more eficiently than
others.
Economic Interdependence
Economic Interdependence
but
interest.
care
None of it worked.
of the prisoners.
prisoner that
each
they
arrive alive.
The answer
is to reward the captains for
keeping the passengers alive, and voila!
Allocation
Choosing
among
alternatives to
satisfy
be
Opportunity
Benefit
produce.
it is operating at maximum production.
This
When an economy is operating at full capacity
is also known as the production possibilities
frontier.
Production possibilities
help
us understand the concept
70
D
60
50
Guns
40
30
20
C
10
0
100
200
300
400 500
Butter
600
700
questions.
WHOM
Standard
of Living
The
framework
for analysis a structure that helps explain
how things are organized.