Unit One: Basic Economic Concepts

Economics: 

• The study of how people allocate their limited resources to satisfy their nearly unlimited wants

Wants – the desires of the citizens

• Always going to be broader than your needs 

Needs – basic requirements for survival


Shortage – occurs when the quantity demanded is greater than the quantity supplied

• Always temporary, cause prices to increase 

Surplus – occurs when the quantity supplied is greater than the quantity demanded

• Cause prices to decrease 

Goods:

• Consumer goods – goods that are intended for final use
• Example: A hamburger at Whataburger.

• Capital goods – items used in the creation of other goods
• Example: Steel, tires, etc. (parts to make a car)

Factors of Production:

• Entrepreneurship 
• Capital 
• Land 
• Labor 

Positive Economics – Claims that attempt to describe the world as is

• Very descriptive, all about facts 
• Example: Minimum wage laws causes unemployment. (Someone is going to be laid off somewhere)

Normative Economics – Claims that attempt to prescribe how the world should be

• Based upon opinions 
• Example: The government should raise the minimum wage.