Textbook Notes (363,460)
United States (204,583)
Economics (211)
01:220:102 (140)
Chapter 1

Chapter 1 Notes

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Rutgers University
Jack Skydel

Chapter 1 Notes • Scarcity: Our inability to get everything we want o Because we can’t get everything we want, we must make choices • Incentive: Areward that encourages an action or a penalty that discourages one o Ex. Prices • Economics: The social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices o Microeconomics: The study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments  Ex. of microeconomic questions: Why are people downloading movies? How would a tax on e- commerce affect eBay? o Macroeconomics: The study of the performance of the national economy and the global economy  Ex. of macroeconomic questions: Why is the U.S. unemployment rate so high? Can the Federal Reserve make our economy expand by cutting interest rates? • Goods and services: The objects that people value and produce to satisfy wants. Goods are physical objects such as cell phones. Services are tasks performed for people such as cell-phone service. • Factors of production: The resources used to produce goods and services 1. Land: Natural resources- minerals, oil, gas, coal, water, air, etc. 2. Labor: Physical and mental efforts of all the people who work on farms and construction sites and in factories, shops, and offices a. Human capital: Quality of labor depends on this; the knowledge and skill that people obtain from education, on-the-job training, and work experience. Your human capital will grow as you gain work experience. Human capital also expands over time because more and more people are getting education. 3. Capital: The tools, instruments, machines, buildings, and other constructions that businesses use to produce goods and services 4. Entrepreneurship: The human resource that organizes labor, land, and capital. Entrepreneurs are the drivers of economic progress. They develop new ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions • People earn their incomes by selling the services of the factors of production they own: o Land earns rent o Labor earns wages o Capital earns interest
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