Positive vs Normative Positive Statement can be proved

Positive vs Normative • Positive Statement - can be proved or disproved by fact • Normative Statement - based upon ones value system

Macro vs Micro • Microeconomics - the study of behavior in particular markets examining what factors influence individual choices • Macroeconomics - the study of the economic behavior of the entire economy

What is an Economy? ECONOMY - the realized system of human activities related to the production, distribution, exchange, and consumption of goods and services of a country or other area.

Questions ALL Economic Systems Must Ask and Answer 1. What Shall We Produce? 2. How Shall We Produce It? 3. Who Will It Be Produced For?

Factors of Production Land, Labor, Capital and Entrepreneur • Land - anything available without human effort (natural resources) • Labor - any application of human effort to produce something (human resources) • Time is classified under labor - it is non renewable and scarce

• Capital - tools used to produce something • Real - means of production that are man made. Tools used to produce something. • Human - knowledge and skills used to produce something. • Monetary - money used to produce real capital

• Entrepreneurship - person who perceives profitable opportunities and organizes resources into productive ventures assuming the risk of success or failure. • Someone who starts a business

GDP • Gross Domestic Product ( GDP ) - the value of all of the finished goods and services produced within an area , usually a country • Per Capita GDP - the gross domestic product divided by the population. How much is produced person. • Best judge of how well an economy is working

PPF

How to increase PPF • more productive labor force • improvement in quality and quantity of natural resources • improvement in quality and quantity of capital • improvement in health and education of labor • new technology