studyguide1spring2008eco111 - FOUNDATIONS OF ECONOMICS The...

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Disclaimer: This is not complete coverage of the material. You should study: your lecture notes, handouts, and textbook. 1 FOUNDATIONS OF ECONOMICS The following two facts provided the basic foundation for the field of economics: 1-Unlimited wants 2-Limited economics resources Economic Resources: A. Land or Natural Resources (gifts of nature) B. Labor or human resources C. Capital D. Entrepreneurship DEFINITION: Economics is the study of how to allocate our limited resources among unlimited wants Microeconomics : It is the study of an individual unit in the economy, such as behavior of an individual market, etc. Macroeconomics : It is the study of economy as a whole The method of Economics: Economics asks and attempts to answer two kinds of questions: Positive and Normative Positive Statements deals with facts (without value judgment) Normative Statements involves value judgments; statements about what ought to be Positive economics is divided into two groups: Descriptive economics and Economic theory Descriptive Economics is the compilation of data that describe facts Economic Theory attempts to generalize about data and interpret them; it is a statement or sets of related statements about cause and effect, action or reaction. (An abstraction or simplification of the real world) Macroeconomics Theory involves construction of models of behavior of certain economic variables Variable : It is apiece of information that takes on different values at different times. Model : is a formal statement of theory; consists of one or more relationships between/among macro variables (or values) DEMAND & SUPPLY Market: A market is an institution or mechanism that brings together buyers (demanders) and sellers
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This note was uploaded on 03/30/2008 for the course ECO 111 taught by Professor Prof.kara during the Spring '08 term at West Chester.

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studyguide1spring2008eco111 - FOUNDATIONS OF ECONOMICS The...

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