Unit 1 Definitions and Differentiation

• Positive vs normative economics:
-Positive economics: Claims that attempt to describe the world as it is; Very descriptive. Ex. Minimum wage laws cause unemploymernt.

-Normative ecconomics: Claims that attempt to prescrive how the world should be; Very prescriptive, based upon opinion. Ex. The government should raise the minimum wage.

• Wants, Needs, Scarcity, Shortage, and Surplus:

-Wants: Desires of the citizens.

-Needs: Basic requirements for our survival
Image result for needs vs wantsImage result for needs vs wants

-Scarcity: it is the fundamental economic problem that all societies face. Unlimited wants with limited resources.

-Shortage: Quantity demanded is greater than quantity suplied; Price goes up ^

-Surplus: Quantity supplied is greater than quantity demanded; Price goes down. v

• 4 Factors of Production:

1.)Land (natural resources)
2.)Labor (work exerted) 
3.)Capital (human vs physical, see below) 
4.)Entrepreneurship (must be a risk taker)

3.)A.) Capital:Human Capital: Knowledge and skills that a worker develops through education and experience.
3.)B.) Capital:Physical Capital: Human made objects tat are used to create other goods and services.

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