1. Microeconomics How Markets Work

2. Economics…. The study of how we choose to use scarce productive resources that have alternative uses to produce commodities of various kinds and to distribute them for consumption (Samuelson and Nordhaus).

3. The Factors of Production: 1. Land 2. Labour 3. Capital 4. Enterprise

4. 3 Important Questions: 1. What commodities should be produced? 2. How should the commodities be produced (privately or by the state)? 3. Who should the goods be produced for?

5. Positive vs. Normative Positive statement: a statement which deals with facts and is testable. Normative: a statement which involves a value judgement. Words associated with normative statements: ought, should.

6. Scarce Resources Scarce resources vs unlimited demand

7. Decisions have to be made! Scarce resources mean that we have to choose between options. When we make a choice between two options, by necessity we give up one of those options. This means we incur an opportunity cost. We are constantly making choices and as a result we constantly incur opportunity costs