Chapter 2- Thinking Like an Economist

Two types of actors

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Terms in this set (10)

Two types of actors

Households and firm

Goods and Services(firms)
Market for factors of production(household).

-Buy/Hire factors of production goods and services.
-Sell goods and Services

OWN the factors of production
-Labor land and capital.

Production Possibilities Frontier
All the different combinations of goods a country can produce during a period of time, given full exploitation of the resources available. Can produce anything along the line (most efficient) or within it (inefficient).

y/x
ex france gives up 2 units for 1 cloth
600(y) / 300(x) = -2
ex England gives up 2/3 units for 1 cloth
200(y)/ 300(x) = - 2/3
England is more efficient because it is closer to zero.

On the line, efficient levels of production with resources. not a steep graph

Below the line, producing less than available resources. steep graph

positive statement

claims that attempt to describe the world as it is
ex minimum wage laws CAUSE unemployment

normative statements

claims that attempt to prescribe how the world should be
ex. The gov't SHOULD raise the minimum wage.