Unit 1, Subject 1 AP ECO
Macroeconomics: international trade, larger scope
Microeconomics: supply demand, firms, more narrow scope
POSITIVE VS NORMATIVE ECONOMICS
Positive: claims the attempt to describe the world as is
-very descriptive in nature
-example: minimum wage laws causes unemployment. True: every time a state increases federal minimum wage employers fire people and unemployed increase.
-based on facts
Normative: claims that attempt to prescribe how the world should be
-example: The government should raise minimum wage.
-based on opinion
Wants: desires of citizens
-always broader than needs
-extensive
Needs: basic requirements for survival
Scarcity: outcome of unlimited human wants and limited resources
-fundamental economic problem that all societies face
-makes prices fluctuate in resources that are limited such as fossil fuels
Shortage: quantity demanded is greater than quantity supply
-temporary, a restock in progress because demand was high and material ran out
-whos the highest bidder?
-prices go up
Surplus: quantity supply is greater than quantity demanded
-too much of something you dont need makes it go on clearance to make sure you get rid of stuff
-price is going to go down
Goods and Services:
Goods: tangible (something you can touch) item that satisfies a want
Services: works preformed for someone else
Consumer Good: customer is getting the finished product
-a pencil pouch
Capital Good: products used in the creation of other goods (unfinished)
-example tires in making a car
-assemble it yourself, not getting finished product
Factors of Production (4)
1. LAND
-natural resources
2.LABOR
-work exerted
3. CAPITAL
-human capital: The knowledge and skills that a worker gains through education and experience.
-physical capital: Human made objects used to create other objects. ex: machinery, tools
4. ENTREPRENEURSHIP
-You must be innovative and be considered a risk taker. example: starting a business.
Microeconomics: supply demand, firms, more narrow scope
POSITIVE VS NORMATIVE ECONOMICS
Positive: claims the attempt to describe the world as is
-very descriptive in nature
-example: minimum wage laws causes unemployment. True: every time a state increases federal minimum wage employers fire people and unemployed increase.
-based on facts
Normative: claims that attempt to prescribe how the world should be
-example: The government should raise minimum wage.
-based on opinion
Wants: desires of citizens
-always broader than needs
-extensive
Needs: basic requirements for survival
Scarcity: outcome of unlimited human wants and limited resources
-fundamental economic problem that all societies face
-makes prices fluctuate in resources that are limited such as fossil fuels
Shortage: quantity demanded is greater than quantity supply
-temporary, a restock in progress because demand was high and material ran out
-whos the highest bidder?
-prices go up
Surplus: quantity supply is greater than quantity demanded
-too much of something you dont need makes it go on clearance to make sure you get rid of stuff
-price is going to go down
Goods and Services:
Goods: tangible (something you can touch) item that satisfies a want
Services: works preformed for someone else
Consumer Good: customer is getting the finished product
-a pencil pouch
Capital Good: products used in the creation of other goods (unfinished)
-example tires in making a car
-assemble it yourself, not getting finished product
Factors of Production (4)
1. LAND
-natural resources
2.LABOR
-work exerted
3. CAPITAL
-human capital: The knowledge and skills that a worker gains through education and experience.
-physical capital: Human made objects used to create other objects. ex: machinery, tools
4. ENTREPRENEURSHIP
-You must be innovative and be considered a risk taker. example: starting a business.
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