01/08/14 Ch. 2- Into/Scarcity

• Macroeconomics- Study of the major components of the economy. 
• Inflation, GDP, unemployment, supply & demand. 
• Microeconomics- Study of how households and firms make decisions and how they interact in market. 
• Supply & demand, market structures.
• Positive v. Normative Economics
• Positive economics                             
• attempts to describe the world as it is.        
• very descriptive                                
• ex: minimum wage laws cause unemployment
• Normative economics                              
• attempts to prescribe how the world should be
• ex: the government should raise minimum wage
• Wants v. Needs
• wants- desires of citizens, broader than needs.
• needs- basic requirements for survival.
• Scarcity v. Shortage
• Scarcity- the most fundamental economic problem that all societies face. In other words, how to satisfy unlimited wants with unlimited resources.
• Shortage- situation in which quantity demanded is greater than quantity supplied. 
• Goods v. Services
• Goods- tangible (touch or feel) commodities.    
• Consumer goods- goods that are intended for final use by the consumer.               
• Capital goods- Items used in the creation of other goods.  ex: Machinery, trucks.
• Services- work that is performed for someone else, cannot be touched or felt.