Core Concept of Microeconomics
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A Review of Core Concepts: Introductory MICROECONOMICS
1st Edition
James M. Walker
Professor of Economics Indiana University, Bloomington walkerj@indiana.edu
December 2010
©2010 by the Author
TOPIC I: ECONOMICS - ISSUES RELATED TO THE STUDY OF THE ALLOCATION SCARCE RESOURCES
I.
Introduction to Economics A. B. What is the central focus of economics? How are the concepts of scarcity and opportunity costs related?
II.
Gains from trade - comparative advantage and consumption possibilities
CONCEPTS AND PRINCIPLES WHAT IS ECONOMICS? A primary concern of economics is the study of “markets” - any interaction between potential buyers and sellers. Economics focuses on how markets work, how they affect the allocation of scarce resources, and ultimately the gains from trade. Economics is much more, however. In studying economics we focus on how individuals, firms, government decision makers respond to changing incentives and changing information. Economics is a science that deals with how decisions depend on incentives, information, and the institutional decision setting (the rules under which decisions are made). In addition, one can think of economics as another one of the social sciences - included with political science, sociology, psychology, and anthropology. So, what is social science? One answer is that it is simply the “study of society” -- the study of how humankind has evolved in respect to how we order our lives, how we make decisions, how we determine what is important, etc. So, why are there different social sciences? 1) In some instances, there is an emphasis on different issues - a sort of specialization. Economics focuses more on how “ economic incentives” affect decisions. In some sense there is competition between the sciences - the study of society can be approached in many different ways - different scholars have chosen different approaches. How does one social science win over another? It might be thought of as a competition...
1st Edition
James M. Walker
Professor of Economics Indiana University, Bloomington walkerj@indiana.edu
December 2010
©2010 by the Author
TOPIC I: ECONOMICS - ISSUES RELATED TO THE STUDY OF THE ALLOCATION SCARCE RESOURCES
I.
Introduction to Economics A. B. What is the central focus of economics? How are the concepts of scarcity and opportunity costs related?
II.
Gains from trade - comparative advantage and consumption possibilities
CONCEPTS AND PRINCIPLES WHAT IS ECONOMICS? A primary concern of economics is the study of “markets” - any interaction between potential buyers and sellers. Economics focuses on how markets work, how they affect the allocation of scarce resources, and ultimately the gains from trade. Economics is much more, however. In studying economics we focus on how individuals, firms, government decision makers respond to changing incentives and changing information. Economics is a science that deals with how decisions depend on incentives, information, and the institutional decision setting (the rules under which decisions are made). In addition, one can think of economics as another one of the social sciences - included with political science, sociology, psychology, and anthropology. So, what is social science? One answer is that it is simply the “study of society” -- the study of how humankind has evolved in respect to how we order our lives, how we make decisions, how we determine what is important, etc. So, why are there different social sciences? 1) In some instances, there is an emphasis on different issues - a sort of specialization. Economics focuses more on how “ economic incentives” affect decisions. In some sense there is competition between the sciences - the study of society can be approached in many different ways - different scholars have chosen different approaches. How does one social science win over another? It might be thought of as a competition...