MICRO-1-2

• scarcity restricts options and demands choices
• Microeconomics is the part of economics concerned with decision making by individual customers, workers, households, and business firms.
• Macroeconomics examines the performance and behavior of the economy as a whole
• Aggregate is a collection of specific economic units treated as if they were one unit
• Positive economics focuses on facts and cause-and-effect relationships
• normative economics, which incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal.
• economizing problem the need to make choices because economic wants exceed economic means
• Budget line is a schedule or curve that shows various combinations of two products a consumer can purchase with a specific money income
• Attainable combinations are the combinations of needs or wants that are inside the budget line.
• Unattainable combinations are the combinations of needs or wants that are outside the budget line.
• land includes all natural resources (“gifts of nature”) used in the production process
• resource labor consists of the physical actions and mental activities that people contribute to the production of goods and services
• consumer goods satisfy wants directly
• capital goods does indirectly aids the production of consumer goods
• Full employment is when the economy is employing all of its available resources.
• Fixed resources is when the quantity and quality of the factors of production are fixed
• economic system is a particular set of institutional arrangements and a coordinating mechanism to respond to the economizing problem
• laissez-faire capitalism or “pure capitalism” the government’s role would be limited to protecting private property from theft and aggression and establishing a legal environment in which contracts would be enforced and people could interact in markets to buy and sell goods, services, and resources
• command system, in which government owns most property resources and economic decision making is set by a central economic plan created and enforced by the government
• The command system is also known as socialism or communism.
• market system, which is also known as capitalism or the mixed economy.
• self-interest is the motivating force of the various economic units as they express their free choices
• market is an institution or mechanism that brings buyers (“demanders”) and sellers (“suppliers”) into contact
• Specialization means using the resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services.
• barter mean swapping of goods with another goods
• households, which are defined as one or more persons occupying a housing unit
• businesses, which are commercial establishments that attempt to earn profits for their owners by offering goods and services for sale.
• sole proprietorship is a business owned and managed by a single person
• in partnership, two or more individuals (the partners) agree to own and operate a business together
• corporation is an independent legal entity that can— on its own behalf—acquire resources, own assets, produce and sell products, incur debts, extend credit, sue and be sued, and otherwise engage in any legal business activity
• product market, the place where the goods and services produced by businesses are bought and sold.
• resource market in which households sell resources to businesses.
• circular flow model illustrates those flows for a simplified economy in which there is no government.