Economics Is The Study Of Choices When There Is A Scarcity Essay

883 Words Feb 28th, 2016 4 Pages
Economics is the study of choices when there is a scarcity. There are multiple of key concepts that go into economics. Economic decisions are made every day by society, whether business or individuals. Economic models are used to determine the choices that are made by society. The four key choices that are being reviewed are Gross Domestic Product or GDP, inflation, unemployment and price elasticity of demand.
The most widely used measure of national income is Gross Domestic Product. Gross Domestic Product or GDP for short, is the total market value of final goods and services produced within an economy in a given year. The Bureau of Economic Analysis calculates and releases GDP figures every business quarter.
GDP is calculated by two ways, expenditures and income approach. The income approach is calculated by adding up total compensation earned in a year or by what consumers spent.
National income is the sum of the following components
National income = Wages + Rental Income + Interest Income + Profits
NI = W + R + I + PR
Expenditures approach is calculated as the sum of four categories as output.
GDP = C + I + G + NX GDP is broken down into two types, nominal and real. Nominal GDP is the value of GDP in current dollars. Real GDP is a measure of GDP that controls for changes in prices.
Inflation is sustained increases in the average prices of all goods and services. Inflation does not refer to the level of prices but to their percentage of change…

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