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AP Macroeconomics 1-8-13

AP Macroeconomics 1-8-13. Scarcity vs. Shortage. Economics—the study of how people seek to satisfy needs and wants by making choices . We need to make choices in life because every physical thing in this world is scarce. There are limited quantities of EVERYTHING .

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AP Macroeconomics 1-8-13

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  1. AP Macroeconomics1-8-13

  2. Scarcity vs. Shortage • Economics—the study of how people seek to satisfy needs and wants by making choices. • We need to make choices in life because every physical thing in this world is scarce. • There are limited quantities of EVERYTHING. • There are limited quantities of what can be produced, therefore we must choose.

  3. Scarcity v. Shortage • Scarcity—the idea that there are limited quantities of all physical matter on Earth • When you make a decision to do something you have to give up something else. • What you give up is Opportunity Cost. This is the heart of Economics. (more on this later). • Shortageoccurs when merchants can’t or won’t offer enough of a product at a certain price. • Wartime, natural disasters, holiday season. You could say life is economics and economics is life because everything is scarce.

  4. Branches of Economics • Macroeconomics—Looks at either the whole economy or one of its components • Component—small units lumped together to form one collection • The components are household, government, and business sectors (C, G, Ig, Xn)***** • We look at those components to see how they affect the entire economy • Unemployment, imports and exports

  5. C+Ig+G+Xn • C+Ig+G+Xn equals gross domestic product • Add up C, Ig, G, and Xn and you have GDP which is the value of all final goods and services produced in a country in a year

  6. Branches of Economics (cont) Microeconomics—study of small economic units: a particular industry, or firm, or group of households are studied

  7. The Factors of Production • Factors of Production—the resources that are used to make goods and services. • Land—natural resources • Labor—a person’s effort • Capital—any human made resource that is used to produce other goods/services • Physical Capital—eg. Tools, computers, machines, factories, etc. • Human Capital—eg. Training, experience, schooling. • Entrepreneurs—a person who assembles the factors of production to create goods & services

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