Intro to Macroeconomics!

Scarcity vs. Shortage

Scarcity: The most fundamental economic problem that all society's face.

Shortage: Trying to satisfy unlimited wants with limited resources.

Quantity demanding is greater than quantity supplies. (Temporary)

Goods vs. Services

Consumer goods: Goods that are intended for final use by the consumer

Capital goods: items used in the creation of other goods.

Factory, machinery, trucks, tools

Service: work is done for someone else

Factors of Production
• Land
• Labor
• Capital (Human vs. Physical):

Human: Any knowledge and skills gained through education and experience
Physical: Human made objects used to created other goods and services.

• Entrepreneurship: innovative, risk takers

Trade offs: Alternatives that we give up when we choose one course of action over another

Opportunity cost: the most desirable alternative given up by making a decision

Guns on Butter: Where are we spending our money?

Production Possibilities: Alternative ways to use resources (Curve/Frontier)

Point A: efficient and obtainable
Point B: efficient but producing more cars
Point C: efficient but producing more trucks
Point D: under utilization, attainable but inefficient

Inside the Curve: recession, war, underemployment/unemployment in population

Point E: economic growth. Technology, Discover new resources