Fundamentals of Economics
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FUNDAMENTALS OF ECONOMICS I
ECONOMICS, THE SCIENCE OF SCARCITY
*scarcity = shortage
• The science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those who wants.
Demands is infinity while resources is limited. [Demand>resource]
ECONOMIC CATEGORIES
i. Positive economics vs Normative economics
ii. Microeconomics vs Macroeconomics
POSITIVE VS. NORMATIVE ECONOMICS
Positive economics Normative economics
The study of “what is” in economic matters. The study of “what should be” in economic matters.
Deal with cause-effect relationships that can be tested. Deal with value judgments and opinions that cannot be tested.
i.e. What is the effect of a cut in income taxes on unemployment rate? i.e. The income taxes should be cut because the income tax burden on may taxpayers is currently high.
Cause Effect Judgment and Opinion
MICROECONOMICS VS. MACROECONIMICS
Microeconomics Macroeconomics
Microeconomics deals with human behavior and choices as they relatively small units – an individual, a business firm, an industry, a single market. Macroeconomics deals with human behavior and choices as they relate to highly aggregate markets (e.g., the goods and services market) or the entire economy.
• How does a market work?
• What level of output does a firm produce?
• What price does a firm charge for a good it produces?
• How does a consumer determine how much of a good he or she will buy?
• Can government policy affect business behavior?
• Can government policy affect consumer behavior? • How does the economy work?
• Why is the unemployment rate sometimes high and sometimes low?
• What causes inflation?
• Why do some national economies grow faster than other national economies?
KEY CONCEPTS IN ECONOMIC
i. Scarcity
ii. Opportunity cost
iii. Unintended effect
iv. Exchange / trade
BUILDING A DEFINITION OF ECONOMICS
GOODS & BADS
• Utility – The satisfaction one receives...
ECONOMICS, THE SCIENCE OF SCARCITY
*scarcity = shortage
• The science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those who wants.
Demands is infinity while resources is limited. [Demand>resource]
ECONOMIC CATEGORIES
i. Positive economics vs Normative economics
ii. Microeconomics vs Macroeconomics
POSITIVE VS. NORMATIVE ECONOMICS
Positive economics Normative economics
The study of “what is” in economic matters. The study of “what should be” in economic matters.
Deal with cause-effect relationships that can be tested. Deal with value judgments and opinions that cannot be tested.
i.e. What is the effect of a cut in income taxes on unemployment rate? i.e. The income taxes should be cut because the income tax burden on may taxpayers is currently high.
Cause Effect Judgment and Opinion
MICROECONOMICS VS. MACROECONIMICS
Microeconomics Macroeconomics
Microeconomics deals with human behavior and choices as they relatively small units – an individual, a business firm, an industry, a single market. Macroeconomics deals with human behavior and choices as they relate to highly aggregate markets (e.g., the goods and services market) or the entire economy.
• How does a market work?
• What level of output does a firm produce?
• What price does a firm charge for a good it produces?
• How does a consumer determine how much of a good he or she will buy?
• Can government policy affect business behavior?
• Can government policy affect consumer behavior? • How does the economy work?
• Why is the unemployment rate sometimes high and sometimes low?
• What causes inflation?
• Why do some national economies grow faster than other national economies?
KEY CONCEPTS IN ECONOMIC
i. Scarcity
ii. Opportunity cost
iii. Unintended effect
iv. Exchange / trade
BUILDING A DEFINITION OF ECONOMICS
GOODS & BADS
• Utility – The satisfaction one receives...