Step 1: How to Macroeconomics (Start of Unit 1)

Macroeconomics v. Microeconomics

What is Macroeconomics?

• Studies the whole economy 
• -GDP (gross domestic product)
  -unemployment

What is Microeconomics?

• Studies the specific parts of the economy; like how households and firms make decisions an how they interact in markets
  -Supply and Demand
  -Market Structure

Positive Economics v. Normative Economics

• Positive Economics - claims that attempt to describe the world as is, very descriptive
  -Minimum wage laws cause unemployment due to inflation
• Normative Economics - claims that attempt to prescribe how the world should be
  -Governments should raise minimum wage to benefit the people

Needs v. Wants

• Needs - basic requirements for survival
  - Shelter
  -Food
  -Water
• Wants - desires of citizens; much broader than your needs
  -The newest trends
  -The biggest house
  -The most expensive cars

Scarcity v. Shortage

• Scarcity - the most fundamental economic problem that all societies face; trying to satisfy unlimited wants with limited resources
  -Permanent
• Shortage - a situation where the quality demanded exceeds the quality supplied
  -in short, QD>QS
  -Temporary

Goods v. Services

• Goods - tangible commodities that can be bought, sold, traded, or produced
  -There are two types of goods: consumer and capital goods
  -Consumer goods - goods that are intended for final use by the consumer, i.e. a vehicle or candy bar
  -Capital goods - items used in the creation of another good, i.e. machinery or cooking ingredients
• Services - work that is performed for another