Macro Economics Summary
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Chapter 1 – What Is Economics?
A Definition of Economics
Our inability to satisfy all our wants is called scarcity. The choices that we make depend on the incentives that we face. An incentive is a reward that encourages or a penalty that discourages an action. Economics is the social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. The subject divides into two main parts:
- Microeconomics
- Macroeconomics
Microeconomics
Microeconomics is the study of the choices that individuals and businesses make, the way these choices interact in markets and the influence of governments.
Macroeconomics
Macroeconomics is the study of the performance of the national economy and the global economy.
Two Big Economic Questions
Two big questions summarize the scope (gebied/bereik) of economics:
- How do choices end up determining what, how and for whom goods and services get produced?
- When do choices made in the pursuit of self-interest also promote the social interest?
What, How, and For Whom?
Goods and services are the objects that people value and produce to satisfy wants. Goods are physical objects. Services are actions performed.
What? – What we produce changes over time.
How? – Goods and services get produced by using productive resources that economists call factors of production. Factors of production are grouped into four categories:
- Land: The “gifts of nature” that we use to produce goods and services are called land. In economics, land is what in everyday language we call natural resources. It includes land in the everyday sense together with metal ores, oil, gas and coal, water, air, wind and sunshine.
- Labor: the work time and work effort that people devote to producing goods and services is called labor. The quality of labor depends
Chapter 1 – What Is Economics?
A Definition of Economics
Our inability to satisfy all our wants is called scarcity. The choices that we make depend on the incentives that we face. An incentive is a reward that encourages or a penalty that discourages an action. Economics is the social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. The subject divides into two main parts:
- Microeconomics
- Macroeconomics
Microeconomics
Microeconomics is the study of the choices that individuals and businesses make, the way these choices interact in markets and the influence of governments.
Macroeconomics
Macroeconomics is the study of the performance of the national economy and the global economy.
Two Big Economic Questions
Two big questions summarize the scope (gebied/bereik) of economics:
- How do choices end up determining what, how and for whom goods and services get produced?
- When do choices made in the pursuit of self-interest also promote the social interest?
What, How, and For Whom?
Goods and services are the objects that people value and produce to satisfy wants. Goods are physical objects. Services are actions performed.
What? – What we produce changes over time.
How? – Goods and services get produced by using productive resources that economists call factors of production. Factors of production are grouped into four categories:
- Land: The “gifts of nature” that we use to produce goods and services are called land. In economics, land is what in everyday language we call natural resources. It includes land in the everyday sense together with metal ores, oil, gas and coal, water, air, wind and sunshine.
- Labor: the work time and work effort that people devote to producing goods and services is called labor. The quality of labor depends