CLEP Macro Economics - Economics branch of social science that deals with the production distribution and consumption of goods and services How people

CLEP Macro Economics - Economics branch of social science...

This preview shows page 1 - 3 out of 37 pages.

Economics - branch of social science that deals with the production, distribution, and consumption of goods and services.. How people use limited resources in an attempt to satisfy unlimited wantsScarcity Principle – I want something now, “I may not be able to find it later.” This is the reason stores hold “sales” and say, “while supplies last” or “last chance” or “last one”Scarce – the desire of society to obtain and use goods and services is unlimited and the objective of all economic activities is to satisfy these material wantsFull Employment – when all available resources are being used, are those who are capable of working have the opportunity to do so. It also means that all capital equipment is in productive service and that all land is being usedFull Production – all available resources are making the most valuable contributions to outputResources must be allocated and used in the best possible wayIf we fail to achieve full production our resources are underemployedAllocative efficiency – we resources are dedicated to the goods society wants mostProductive Efficiency – is achieved when the least costly method of production is used to produce goods and serviesCost-benefit Analysis Principle – core economic principle. Individuals should take actions only if the benefits outweigh the cost Economists say that people are rational; they set goals and try to read themComparative Advantage – the ability to produce one good or service better than other goods and services, producing at a lower marginal costComparative advantage is the basis for TRADE between people and countries, states that everyone does their best when they do what cost them less. Example: US produces corn, Switzerland produces watches, each should continue concentrating on what they do bestAbsolute Advantage – ability of a nation to produce more of a specific good than another nation using the same amount of resourcesDeveloped by Adam Smith “father of modern economics” Countries will export goods when they have absolute advantage and import goods to a different country that has an absolute advantageAssets – economic resources owned by a company or individualTangible Assets – real estate, equipment, cash (physical assets)Intangible Assets – patents, goodwill, and trademarks (lack physical substance)Demand Curve – a schedule or graph that depicts the amount of a given good that buyer will buyMarket – refers to all buyers and sellers of the goodSystem in a state of Equilibrium – all factors cancel each other out resulting in balance and stability, it can occur in high level and low level economies/recession
Background image
Equilibrium Price – the price at which supply equals demand (also called Market Clearing Price)Equilibrium Quantity – amount of goods sold at equilibrium price, no surplus or shortageAn increase in demand leads to an increase in both Equilibrium price and Equilibrium quantity
Background image
Image of page 3

You've reached the end of your free preview.

Want to read all 37 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes