1. Microeconomics Unit 1

2. Economics is … Social science Efficient use of limited or scarce resources Maximum satisfaction of human economic wants Study of scarcity and choice Scarcity is imbalance between limited resources and unlimited human wants.

3. Market economies are … Decentralized decisions Many firms and individuals Command Economies are … Publicly owned Central authority makes decisions Individual choice is … Decisions on what and what not to do.

4. Why have most command economies failed and most market economies succeeded?

5. Incentives $$$$$$$ Price Profit Property rights Enjoy the rewards of the investment

6. What are resources? CAPITAL LABOR LAND ENTREPRENEURSHIP

7. Scarcity requires that choices be made. Choices imply that things are given up.

8. 1. Define resources. 2. List the four categories of resources. 3. What characteristic of resources results in the need to make choices?

9. Opportunity Cost is … Real cost of something you give up to get something else Marginal Benefit (MB) is … Additional benefit received from a choice Marginal Cost (MC) is … Additional ‘cost’ of a choice Marginal Analysis is … ‘weighing’ the MB and the MC of a choice MB >= MC DO IT; MB <= MC DO NOT!!

10. Microeconomics is … How individuals make decisions How these decision interact Choices made by individuals, household or firms Smaller parts of the whole economy

11. Macroeconomics is … Overall ups and downs of the global economy Economic aggregates Unemployment, inflation, gross domestic produce Summarize data across many different markets Bigger picture

12. Positive economics is … Answers questions about the way the world works. ‘What will’ or’ what will be’. NO value judgments. Normative economics is … Says how the world should work. ‘What should be’. Value judgments – ‘right’, wrong’, ‘best’.