prelim 1 study guide - Part I A ch 1 Economics is the study...

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Part I: A. ch 1 Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. Macroeconomics is the branch examining the economic behavior of aggregates on a national scale. Microeconomics is the branch examining the functioning of individual industries and behavior of individual decision-making units – business firms and households. B. ch 5 Historical population trends Malthusian theory, why was he wrong and may he yet be proven right? Law of diminishing returns? How does diminishing returns apply to the Malthusian theory? C. ch 2 Three basic economic problems 1. What gets produced? 2. How is it produced? 3. Who gets it? -In a command economy the economic questions are answered by a central government which sets output targets, incomes and prices. -In a market economy the economic questions are answered through the “market”, an institution through which buyers and sellers interact and engage in exchange. The Factors of production are: 1. land 2. labor 3. capital (produced means of production, aka machinery etc.) 4. Enterprise/Entrepreneurship Production Possibilities Frontier (PPF): A graph that shows all the combinations of goods and services that can be produced if all of society’s resources are used efficiently.
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