midterm 1 review

midterm 1 review - REVIEW FOR MACRO MIDTERM #1 CH 1...

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REVIEW FOR MACRO MIDTERM #1 CH 1 Economics – study of how people use their scarce resources to satisfy their unlimited wants Scarcity – amount people desire exceeds amount available, not freely available Unlimited wants – people can want virtually anything, however scarcity allows them to only have some of the things they want Factors of production – labor, capital, land, entrepreneurial ability Entrepreneur – has managerial and organizational skills needed to start a firm combined with risk-taking ability Capital – buildings, equipment, and human skill, used to produce goods/services Circular flow model – outlines flow of resources, products, income, and revenue among economic decision makers Households supply labor, capital, land, and entrepreneurial ability to firms through resource market and demand goods/services through product markets Firms demand factors of production from households through resource markets and supply goods/services to households through product markets Households provide revenue to firms through product market and firms provide wages, rent, profit, etc. to households through resource market Price is determinant between households and firms Marginal – incremental, additional, or extra Microeconomics – economic behavior in particular markets i.e. computers, gasoline Macroeconomics – economic behavior of entire economy Economic theory or model – simplification of reality used to make predictions about cause and effect in real world Positive vs. normative economics – factual data compared to opinionated statements CH 2 Opportunity cost – value of best alternative forgone after a choice Barter economy – products traded directly for other products, no money exchange Specialization – focusing effort on specific work task, result of division of labor; specialization leads to comparative advantage Efficiency
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midterm 1 review - REVIEW FOR MACRO MIDTERM #1 CH 1...

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