Economics

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introduction to economics,basic terms of economics,and basic concept of economics.

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Economics

  1. 1. Macro (Aggregates- Industry, not firm) Normative (Value judgments- “What ought to be”)
  2. 2. o The study that how to allocate limited resources and how to satisfy unlimited demands. o Willing to buy something o & Power to buy o Goods are tangible objects that satisfy people’s wants or needs o Ex. Clothes, food, cars, etc. o are actions that can satisfy people’s wants or needs o Ex. Seeing a doctor, watching a baseball game, getting my oil changed
  3. 3. economics Theoretical economics Positive economics Normative Economics Applied economics Macro economics Micro Economics
  4. 4. o Centres on the forces working at the individual level (e.g. o o o o o o individual firms and consumers) Focuses on the needs, desires and buying habits of the individual consumer An example: studying how firms react to increasing costs of production by raising the price and subsequently how consumer/household spending is adjusted when the price rises Supply, Demand and Markets Price theory Behavior of the firm Theory of the distribution of the wealth
  5. 5. o The sum total of all micro parts o Looks at the aggregate (sum or total) of individual markets o The four main areas of study (1) Growth (increase in total output) Business fluctuation (2) Price level (inflation) Money & banking (3) Labour Markets (unemployment) National income & employment (4) The balance in the foreign sector exports/imports, exchange rates
  6. 6. wants Societal activities satisfaction wealth
  7. 7. o Firm’s reaction to increased demand for its product o Decision of a worker to work less due to lower wages o The effects on an industry (group of firms producing similar goods) due to higher labour taxes o Government legislation aimed at monopolies o Studying the effects on all firms in the economy due to a general increase in demand o Total hours of labour (and unemployment) o Effect on total production in the economy due to taxes o Government legislation aimed at increasing taxes on profits for all firms
  8. 8. o Study of how economy works o Statements about how the economy works are positive statements, whether they are true or not o Accuracy of positive statements can be tested by looking at the facts—and just the facts
  9. 9. o Used to make value judgments, identify problems, and prescribe solutions o Statements that suggest what we should do about economic facts, are normative statements o Based on values o Normative statements cannot be proved or disproved by the facts alone
  10. 10. EX AM P LES O F M ICR O ECO NO M IC & M ACRO E CO NO M IC C O NCERNS P rodu ction M icroeconomics Prices Income Em ployme nt P roduction/O utput in I ndividual I ndustries and B usinesses P rice of Individual Goods and Services Distribution of I ncome and Wealth E mploym ent by Individual Businesses & Industries P rice of medical care P rice of gasoline Food prices Apartment rents Wages in the auto industry M inimum wages Executive salar ies Poverty Aggregate P rice Level National Income Consumer prices P roducer P rices Rate of Inflation Total wages and salar ies Total corporate profits How much steel How many offices How many cars National P roduction/O utput M acroeconom ics T otal Industr ial O utput Gr oss Dom estic Product Gr owth of O utput Jobs in the steel industry N umber of employees in a firm N umber of accountants E mploym ent and Unemployment in the Economy T otal number of jobs Unemployment rate
  11. 11. o Resources used to produce goods and services- land, labour, capital, and entrepreneurship o Land: natural resources and surface land and water o Land, water, fish, animals, forests, mineral deposits
  12. 12. o Capital: manufactured goods used to make other goods and o o o o o o services Ex. Machines, buildings, and tools used to assemble automobiles Capital increases productivity- the amount of output that results from a given level of inputs Entrepreneurship: the ability to start a new business or create new products About 30% of new business enterprises fail Of the 70% that survive, only a few become successful
  13. 13. o Resources are used to produce goods and services. o Producers of goods and services are influenced by o o o o natural, human, and capital resources. Natural resources: Materials that come from nature (water, soil, wood, coal) Human resources: People working to produce goods and services Capital resources: Goods made by people and used to produce other goods and services (machines, tools, buildings) Producers: People who use resources to make goods and/or provide services

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