The Basics of Economics

• Macroeconomics V. Microeconomics
• MACRO: Study of the major components of the economy
• Inflation, supply&demand, wages, GDP
• MICRO: Study of how households and firms make decisions and how they interact with the market. 

• Positive Economics V. Normative Economics 
• POSITIVE:  claims that attempt to describe the world as is. (Very descriptive)

• NORMATIVE: Claims that attempt to predict how the world should be (opinion based) 

• Needs V, Wants
• Needs: Basic requirements for survival 
• SCARCITY: fundamental economic problem that all society face;satisfying unlimited wanted with limited resources.
• SHORTAGES: Situation where quantity demanded > quantity supply

• Goods V. Services 
• GOODS: Tangible, bought, sold, traded; 
• Consumer goods- intended for final use by consumer
• Capitol goods- items used in creation of other goods
• SERVICES: Work performed for someone else