BASIC ECONOMIC CONCEPTS
Before anyone can start learning the more complex parts of economics they must first understand some of the more basic principles.
OPPORTUNITY COST
this is the idea that we loose something in order to get something else. This can be shown by the product possibility graph. What was the cost of one thing to produce something else.
Examples:
The opportunity cost of moving from A to B would be 1
The opportunity cost of moving from B to C would be 4
The opportunity cost of moving from C to B would be 10
Before anyone can start learning the more complex parts of economics they must first understand some of the more basic principles.
Microeconomics- Supply and demand. Firms reaction.
Positive vs. Normative economics-
Positive economics claims that attempt to describe the world as is. Very descriptive. An example would be minimum wage laws causes unemployment. Current is 7.25. Minimum wage laws causes unemployement. This excludes things like waitors.
Normative economics claims that attempt to prescribe how the world should be. Very prescriptive. Based on an opinion. An example is that the government should raise the minimum wage.
Wants- desire of the citizens
Needs- basic requirements for survival.
Scarcity- fundamental economic problem that all societies face. Unlimited wants with limited resources.
Shortage- looking where quantity demanded is greater then quantity supplied. Prices rise.
Surplus- opposite of shortage. An abundance of something. Leads to reduce prices.
Goods and services- consumer and capital good. Consumer is more of the final good or already done. Capital is where multiple parts are required to buy something or manage something. Service is not getting paid to do something.
Factors of production-
1.) Land- natural resources
2.) Labor- work exerted
3.) Capital- physical and human capital. Human capital is the knowledge and skills that a worker gains through education and experience. Physical capital are human made objects used to create other goods and services. I.e. buildings, tools, machinery.
4.) Entrepreneur ship- risk taker
this is the idea that we loose something in order to get something else. This can be shown by the product possibility graph. What was the cost of one thing to produce something else.
Examples:
The opportunity cost of moving from A to B would be 1
The opportunity cost of moving from B to C would be 4
The opportunity cost of moving from C to B would be 10
Nice post, don't forget about the other vocab words included in topic one. For example, Macroeconomics, Investment, Utility, Allocate, etc.. All these words play a crucial part in understanding the basic concepts of economics.
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