I. Basic Terms
A. Economics is the
social science concerned with the use of scarce resources like land and labor
used
to fulfill unlimited human wants.
B. Resources are the inputs, want satisfaction is the
output
C. Scarce resources result in a
need to make economic choices.
D. Economic methodology
1. Positive
Economics
a.
What something is
b.
Objective, can be measured
c.
Example: measuring disposable personal income which is an
individual's salary after taxes
2. Normative
Economics
a.
What something ought to be
b.
Subjective, difficult to measure
c.
Requires value judgments by citizens, Political Action Committees (PAC's),
politicians, economists, etc.
d. Examples: should the minimum wage be increased,
should defense spending increase and social spending be lowered
3. Descriptive
Economics
a.
Looking at the real-world to develop Economic Theory
b. Economic
Theory
1. Generalizations concerning economic behavior based upon
real-world observations, empirical by nature
2. Economic theories are objective "positive economics"
3. Assumes behavior is rational and economic (self-serving)
4. Example: as the price of a product increases, consumers tend to buy less
c. Economic Policy
1. Application of economic theory to solve economic problems
2. Economic policies are subjective, "normative economics".
3. How society makes economic choices such as in the 1980's when
a. spending
for the elderly (Social Security) increased
b. spending for children
(Head Start) decreased
d. Economic
Model
1. A simplified representation of real-world economic activity
2. Requires
Ceteris Paribus: Latin for holding other
economic variables constant
3. Models such as the Production Possibility Curve explained in the next chapter
provide
a simplified description of how some aspect of an economy works.
E.
Economic Glossary
from Amosweb
F.
Economics
The Library of Economics and Liberty
has a concise economics Encyclopedia at the bottom of the page.
G. Our
Economics Learning Center
has information for students, teachers, an
professionals.
II. Economic goals of the United States
A. Economic growth
B. Full employment of all
economic resources
C. Price stability (low
inflation)
D. Positive balance of payments
(international flow of dollars)
E. Economic freedom
F. Equitable distribution of
income
G. Economic security (if you have A
through F, you have G)
H.
Economic Report of the
President
gives the President's
view on achieving these goals.
III. The study of economics is
divided into two disciplines.
