1. Macroeconomics Introductions

2. Definitions Economics –Is the study of how people make choices.

3. Definitions Why do we have to make choices? We must choose because our wants are unlimited but our resources are limited.

4. Resources aka the factors of production 1. Natural resources (land) 2. Labor or human effort 3. Physical Capital machines used to make other products 4. Human Capital skills and abilities 5. Entrepreneurial Ability

5. Scarcity Because our resources are limited, we don’t have enough of everything to make all the things that people want. Time can also be scarce, and so can money.

6. Macroeconomics Is the study of how nations make choices We will study how national economies grow and change.

7. Ceteris paribus Latin for “all things being equal”. In a graph or example, ceteris paribus means that all other variables are fixed.

8. 3 Basic Economics Questions 1. What to produce? 2. How to produce it? 3. Who gets it?

9. Four types of Economic Systems Market Command Traditional Mixed

10. Market Where buyers and sellers exchange things. Markets are not necessarily physical places anymore. E-bay is a cyber-market.

11. Production Possibilities Curves With a given amount of resources we can only produce a limited amount of goods or services. The graph on the board will illustrate this concept.

12. Opportunity Cost Is the value of the choice given up. The 1965 Corvair Monza Story Opportunity Cost and the Production Possibilities Curve

13. Marginal Always think “extra” when you see the word “marginal” in economics The margin of averages example on the board

14. Selling the Answers to the Test

15. Demand Demand is the quantity that consumers are willing and able to buy at various prices The law of demand states that as price goes down, the quantity demanded increases.

16. Supply Supply is the quantity that producers are willing and able to sell at various prices. The law of supply states that as price increases the quantity supplied will increase

17. 6 reasons to draw an new Demand Curve 1. Size of group 2. Tastes of Group 3. Expectations

18. 6 Reasons (cont’d) 4. Income 5. Price of substitute good 6. Price of complementary good

19. 4 reasons to draw a new Supply Curve 1. Number of producers 2. Expectations 3. Technology 4. Costs of factors of production

20. Homework