Microeconomics: Mankiw Chapter 2

A visual model of the economy that shows how dollars flow through markets among households and firms. Firms produce goods and services using inputs called the factors of production . households own the factors of production and consume all the goods a firm produce.

labor, land, and capital

a graph that shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology.

The study of how households and firms make decisions and how they interact in markets

The study of economy wide phenomena, including inflation, unemployment, and economic growth

Claims that attempt to describe the world as it is . They are descriptive.

Claims that attempt to prescribe how the world should be