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Economics 2nd Trime Reviewer

Economics 2nd Trime Reviewer - gEconomics 2nd Trime...

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gEconomics 2 nd Trime Reviewer Hello guys! Since our test is going to be analytical, I included a lot of information and examples so we can fully understand it. Hope this helps! And sorry if it’s labo in some parts. I. Microeconomics - study of the behavior of small economic units , such as that of individual consumers or households A. Basic Terms and Concepts Economics Study of human behavior in making choices in production, consumption, exchange and distribution. Positive Economics Based on objective analysis, cannot be questioned for it is scientific and exact. a positive economic statement would be: "Increasing the interest rate will encourage people to save." This is considered a positive economic statement because it does not contain value judgments and its accuracy can be tested. Normative Economics - Subjective & value judgments. Morality of actions An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels". By contrast, a positive (or objective) economic observation would be, "Big tax cuts would help many people, but government budget constraints make that option infeasible." Sample question : Is the statement: 'If the United States enters a war in the Middle East, the economy will go into a recession.' a Positive or Normative statement? Answer: It’s normative because it judges that an action produces consequences that are bad. Minimum Wage P 350 : lowest rate of pay allowed by the law Wage meaning money you earn for A DAY Established to protect the rights of workers Opportunity Cost Any decisions involving two or more options involve opportunity cost. It is the forgone value of the option you did not choose. Production Possibility Frontier ( PPF ) graph/table that shows the maximum possible combinations of outputs that can be produced from given inputs. ( remember the guns and butter? YEAH THAT ONE!! The graph is inversely proportional and has a downward slope! ) Which means the more butter you produce the less guns you can produce and vice versa. Scarcity Limited Natural resources which are used in production Scarcity involves opportunity cost. People must make choices between different items because the resources are limited. These decisions are made by giving up (trading  off) one want to satisfy another which is opportunity cost.   Shortage Situation where the quantity available or supplied in a market falls short of the quantity demanded . Can be solved by rising prices. Scarcity refers to the available NATURAL resources at and that cannot be produced while shortage is lack of goods which are MAN MADE and yeah you can produce. Circulation of Money / Flow of the Economy Labor – wage Firms ( workers ) Labor Products ( families ) Households Labor-Wage **Just draw lines please hehe. Clockwise!
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Firms create products that are bought by the households who provide labor for the firms and the firms provide them with wage!
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