Section 1 definitions

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Section 1 definitions

  1. 1. Section 1 – definitions <br />Serina Yamada<br />IB Economics <br />
  2. 2. Microeconomics & Macroeconomics <br />Microeconomics is the study of the behavior of individual markets. <br />Macroeconomics is the study of how the economy as a whole works.<br />onlinetutorsite.com<br />
  3. 3. Positive Economics & Normative Economics<br />Positive Economics examines matters of economics that can be proven to be right or wrong by looking at the facts.<br />Normative Economics examines matters of economics that are based upon opinion and so are incapable of being proven to be right or wrong.<br />
  4. 4. Scarcity <br />Scarcity exists because of the limited availability of economic resources relative to society’s unlimited demand for goods and services. <br />http://trendsupdates.com/water-no-longer-a-fundamental-right/<br />
  5. 5. Factors of Production <br />L – Land is the Physical factor of production. It consists of natural resources, some of which are renewable and some of which are non-renewable.<br />L – Labor is the human factor of production. It is the physical and mental contribution of the existing workforce to production. <br />C – Capital is the factor of production that is made by humans and is used to produce goods and services. It occurs as a result of investment.<br />E – Entrepreneurship is the factor of production involving the organization of the other factors of production and also involves risk – taking. <br />
  6. 6. Opportunity Cost <br />Opportunity Cost is the next best alternative forgone when an economic decision is made. <br />http://www.intuitivewu.com/2010/08/opportunity-cost/<br />
  7. 7. Free Goods & Economic Goods<br />Free goods are goods which are unlimited in supply and have no opportunity cost. A free good has an unlimited supply at market price zero.<br />Economic goods is a good or service that is relatively scarce and so has a price. An opportunity cost is involved when it is consumed.<br />
  8. 8. Utility <br />Utility is the satisfaction or pleasure that an individual derives from the consumption of a good or service.<br />
  9. 9. Production Possibilities Curve (PPC)<br />A PPC curve shows the maximum combination of goods or services that can be produced by an economy in a give time period, if all the resources in the economy are being used fully and effectively.<br />
  10. 10. Free Market Economy <br />A Free Market Economy is an economy where the means of production are privately held by individuals and firms. Demand and supply determine what to produce, how to produce it and for whom to produce. <br />optimistworld.com<br />

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