Unit 1 notes 01/05/16

Macroeconomics vs. Microeconomics

Macro- study of the economy as a whole 
Includes:

• international trade
• wage loss
• inflation

Micro- the study of individual or specific units of the economy

Includes:

• supply and demand
• market structures 
• business organizations

Positive Economics vs. Normative Economics

Positive Economics is FACTUAL & RELIABLE

• attempts to describe the world as is
• very descriptive
• collects and presents facts
• focuses on "what is"

Normative Economics is an OPINION

• attempts to describe how the world "should be"
• very descriptive in nature
• "ought to be"

Needs vs. Wants

Needs are the basic equipment for survival. (food, water, shelter, clothing)

Wants are the desires of the citizens.

Goods vs. Services

Goods are the tangible commodities.

1. Capital goods- items used in the creation of other goods
2. Consumer goods- goods intended for final use by consumer

Service is the work performed for someone.

Scarcity vs. Shortage

Scarcity is the most fundamental economic problem that all societies face.

• How to satisfy unlimited wants with limited resources.

Shortage is when quantity demanded > quantitative supplied.