Def.

the word comes from Ancient

Greece and means management of ones own household.

Todays textbook definition = The study of the way society makes decisions about the use of scarce resources.

Economics is one of the social sciences, which means that fundamentally it is a study of people and societies. Specifically it is the study of how people and societies make choices about using the resources they have (which are scarce) to try to satisfy their wants and needs.

The field of economics is divided into two disciplines: micro and macro economics.

The branch of economics which investigates economic policy in terms of individual decisionmaking (small scale) Example: supply and demand, competition, capital flows, government and corporate finance, and income distribution. The study of the individual parts of the economy, the household and the firm, how prices are determined and how prices determine the production, distribution and use of goods and services.

Analysis of the overall economy using information such as unemployment, inflation, production and price levels. The study of aggregate (large scale) economic variables such as national income, employment, interest rates, exchange rates, and prices. Often because of aggregation, index numbers are used to represent macroeconomic variables.

Micro is the bottom up view of the economy, focusing on individual households and firms. Macro is the top down view and gives the big picture of the economy (government).

Scarcity is the central problem in economics resulting from the imbalance between relatively unlimited wants and limited resources

There aren't enough resources to give everyone what they want. Scarcity necessitates choice. Every time we choose to use scarce resources to make one product, we must give up the opportunity to use those resources to make something else.

Why is it important to recognize economic fact from sayings?

POSITIVE ECONOMICS ECONOMICS that describes the world as it is, rather than trying to change it. The opposite of NORMATIVE ECONOMICS NORMATIVE ECONOMICS Economics that tries to change the world, by suggesting policies for increasing economic WELFARE. The opposite of POSITIVE ECONOMICS

economics in which judgments about the desirability of various policies are made; the conclusions rest on value judgments as well as facts economic analysis that makes recommendations about economic policy Normative economics is the branch of economics that incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal.

economics that describes how the economy behaves and predicts how it might changefor instance, in response to some policy change This economic analysis relies heavily on quantification, as opposed to normative argument. economic analysis that explains what happens in the economy and why, without making recommendations about economic policy

focuses on facts and cause-and-effect relationships and includes the development and testing of economics theories. Positive economics are verifiable, and involve descriptive or conditional statements

Descriptive = statements of fact. Car sales rose by 7%

Conditional statements = if then statements that can be proven true or false. If interest rates rise fewer people will seek loans.

STOCK VARIABLE The amount existing at a POINT IN TIME. FLOW VARIABLES Non-static factors that change at any point in time. Examples include Income, Consumption, and Interest Earned. ECONOMIC FORECAST A statement giving specific values predicted for particular variables. ECONOMIC PREDICTION A conditional statement about the general direction of economic events or situations.