ECON
03___Ch_02___Econ_101

03___Ch_02___Econ_101 - Econ 101 Introduction to...

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  Econ 101 Introduction to Microeconomics Professor Richard V. Burkhauser 2 2 Thinking Like an Economist
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Econ 101 – Professor Burkhauser Key Concepts circular-flow diagram, p. 22 production possibilities frontier, p. 24 microeconomics, p. 27 macroeconomics, p. 27 positive statements, p. 28 normative statements, p. 28
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Figure 2.1 The Circular Flow Spending Goods and services bought Revenue Goods and services sold Labor, land, and capital Income = Flow of inputs and outputs = Flow of dollars Factors of production Wages, rent, and profit FIRMS •Produce and sell goods and services •Hire and use factors of production •Buy and consume goods and services •Own and sell factors of production HOUSEHOLDS •Households sell •Firms buy MARKETS FOR FACTORS OF PRODUCTION •Firms sell •Households buy MARKETS FOR GOODS AND SERVICES
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Econ 101 – Professor Burkhauser Question 2.1: Scarcity It is said that the U.S. is an “economy of scarcity”. This statement: a) is false, because the U.S. is one of the richest countries the world has ever known b) is false, because the resources that are scarce in the U.S. can always be imported from abroad c) is true, because our resources are not sufficient to realize all of
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