Analyzing Current Economic Issues PDF

Analyzing Current Economic Issues Introduction The Economic Problem What is Economics? ⚪ Economics is the study of how we make decisions about how to use scarce resources ⚪ Scarcity refers to the basic economic problem, the gap between limited – that is, scarc...

Analyzing Current Economic Issues Introduction The Economic Problem What is Economics? ⚪ Economics is the study of how we make decisions about how to use scarce resources ⚪ Scarcity refers to the basic economic problem, the gap between limited – that is, scarce – resources and limitless wants. Positive and Normative Economics ⚪ Positive (or Analytical) Economics deals with facts and direct observations of the world around us. ⚪ Normative (or Policy) Economics deals with statements about what should be, opinion.  Resources Raw materials used in production come from natural resources. Human resources (labor) describe the human work effort, both physical and mental, expended in production. Capital resources are the man-made physical resources (such as buildings, tools, machines, and equipment) used in production. Microeconomics and Macroeconomics ⚪ Microeconomics focuses on individual consumers and businesses. ⚪ Macroeconomics takes a broad view of the economy. The Economic Problem ⚪ Economists deal with the economic problem. Economic stakeholders must continually make choices. Their wants are unlimited. They face a limited supply of economic resources. Economic Models ⚪ Economic models: simplify economic reality show how dependent variables are affected by independent variables include inverse and/or direct relationships incorporate a variety of assumptions such as ceteris paribus are classified as part of either positive economics or normative economics The Basic Economic Questions ⚪ There are three basic questions any society must answer: what to produce how to produce for whom to produce