ECON IS EASY !!!!!!!!!

HOW many kinds of Econ??? Microeconomics (individual parts of the economy & the actions of individuals and firms) Macroeconomics (the economy as a whole) Positive Economics (scientifically analyzes data to establish generalizations about economic behavior) Normative Economics (involves value judgments about what the economy should be like)

Economic Systems (sets of accepted behaviors, laws, and institutions concerning relationships and principles within economics) Traditional – prevalent in 3 rd world countries. Ex: passing down power, ownership, etc. through family lines. Command – Entity with absolute power makes decisions in the name of society Planning – Democratic process determines choices Market – free enterprise system. Also referred to as capitalism, private enterprise or free market systems. The rights of individuals and private ownership are strongly valued.

BUY ME! Capital (what you buy stuff with) Market (where goods or services are exchanged) Competition (“Buy mine!” “NO! Buy mine!”)

“What you want, Baby, I got it…” Law of Supply (quantity supplied directly related to the price, ceteris paribus) Law of Demand (quantity demanded INVERSELY related to price, ceteris paribus) Supply Side Economics (cuts would create economic growth, boosting tax revenues and shrink deficits)

That’s GOOD! Complementary goods – goods usually sold together. EX: rugs and padding Substitute – product or service that satisfies the need of the consumer that another product would fulfill

Wanna make something of it??? Cost of production – the value of an object decided by the cost of the resources needed to make it Opportunity costs – real costs measured in terms of the real value that is foregone when a choice is made. EX: you choose to go to a movie instead of studying; the OPPORTUNITY COST is what you might have gained by studying. Production possibilities – many different combinations of goods and services that can be made by the same resources, ie, 3 cars and 2 tractors or 4 cars and one tractor

Factors of Production Land (natural) resources Labor resources (human capital) – includes humans’ skills and knowledge Capital resources – goods produced to be used later in the production of final goods. EX: tools, nuts, bolts Entrepreneurial resources – the decision making involved in using resources to produce goods.

Awwww, Gsss GNP – Gross National Product involves the value of the production of a nation’s PERMANENT residents. A US citizen working in Mexico is factored into the US GNP. GDP – Gross Domestic Product is the total market value of all the goods and services produced within the borders of a nation during a specific period. REAL GDP – the GDP after adjustment for inflation

-ISMs Communism – collective property ownership Socialism – group voluntarily shares their resources for the common good Mercantilism – wealth is based on the amount of precious metals that a country prosseses

John Maynard Who?? John Maynard Keynes authored a book in Main idea was that in time of decreased demand and output, government policies could replace private spending. FDR’s New Deal, Obama’s Stimulus packages C + G + I + X =y Consumer spending + government spending + private investments + net exports = GDP

Random Vocab Aggregate – a composite or total Tariff – government imposed taxes on imported OR exported goods Subsidies – monetary assistance to group or individual to aid the public (stimulus money) Incentive- when self-interest is used to get people to take risks

MORE VOCAB??? Ceteris paribus – “All things being equal”. When economists look at a change in the market, they isolate their focus by neutralizing changes in other areas Laissez-Faire – “Hands off”. Government does not interfere with private economic choices (think inverse of bail out) Oligopoly – a market that is controlled by just a few firms (think electronics)

MORE VOCAB???? Margin – difference between the cost of two alternatives OR the difference between two benefits Elasticity- relationship of change in price to the change in quantity demanded. EX: a diabetic’s demand for insulin is INELASTIC because the demand will not be affected by price change. Price ceiling – maximum LEGAL price of a commodity

And Finally… TANSTAAFL There Ain’t No Such Thing As A Free Lunch CHOICES HAVE OUTCOMES!!!