Macro Book Notes Chapter 1 all WHAT IS ECONOMICS I economics the study of choice under conditions of scarcity A microeconomics the study of the behavior of individual households rms and governments the choices they make and their interaction in speci c markets B macroeconomics the study of the behavior of the overall economy C positive economics the study of how the economy works D normative economics the practice of recommending policies to solve economic problems desire for it A B II scarcity a situation in which the amount of something available is insuf cient to satisfy the time and spending power are scarce results in us making choices about how to allocate time and spending power III opportunity cost what is given up when taking an action or making a choice both implicit and explicit A when the alternatives to a choice are mutually exclusive only the next best choice the one that would be chosen otherwise is used to determine the opportunity cost of the choice B explicit cost the money actually paid for a choice money C implicit cost the value of everything else that is sacri ced for a choice time foregone income IV resources the most basic elements used to produce goods and services labor the time human beings spend producing goods and services A B capital any long lasting lasts for a year tool that is produced to help make other goods and services 1 physical capital the part of the capital consisting of physical goods machinery equipment factories C 2 human capital the skills and training of the labor force 3 capital stock the total capital in a nation that is productively useful land the physical space on which production takes place the useful material in or on the land natural resources i e oil iron soil coal D entrepreneurship the ability and willingness to combine the other resources into a productive enterprise 1 schumpeterian de nition individuals who engage in product or process innovation
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