Economics. in Life

Economics Notes

 Every economy must preform these 3 functions:

1) Allocation: what type of goods and services should be produced (and how much of each one should be produced)

2) Production:

3) Distribution

 4 categories of resources:

1) Labor

2) Entrepreneurship

3) Land

4) (Physical) capital: Manufacturing aids to production, such as machinery and buildings, used to produce goods and services.

I.e: Computers, assembly lines, trucks, copy machines

 Goods are intangible (can touch)

 Services are tangible (can't touch)

 Types of economies

1) Command economy: Government makes all economic decisions

2) Laissez-faire economy: Government doesn't make any economic decisions (about allocation, production, and distribution) leaving it up to the people

3) Mixed economy (market system): People make most of the economic decisions (about allocation, production, and distribution) but the government makes some of the economic decisions too.

 Economics is the study of how individuals, institutions, and society make choices under conditions of scarcity(limited resources)

 Every choice that is made has good and bad consequences

 Economics helps forecast the benefits and cost of potential decisions. This information helps people make better decisions

 Scarcity

o The fundamental problem confronting any economy. Because there is finite amount of resources ( land, labor, capital, entrepreneurship) in an economy:

 There is a limit (a maximum) to the amount of goods that can be produced

 If society wishes to produce MORE of a particular good, then it must often move resources out of the production of some other good, resulting in LESS of the other goods.

 Principles of economics split into two parts:

1) Macroeconomics: Looks at the economy as a whole and things like unemployment in the nation, inflation in the nation, interest rates, growth of average incomes and wages. (how the nations economy is performing)

2) Microeconomics: Looks...