Economics is defined as the science of choice and how choices change with scarcity. It explains economic behavior and can be positive, describing what exists, or normative, making judgments and prescribing actions. Microeconomics studies individual decision-making and markets, while macroeconomics analyzes employment, income and production on a national scale. Economics aims to understand opportunity costs, markets, society, global affairs, and inform citizens.

1. Pengantar Ekonomika
Week 2
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2. Definition
• Economics is the science of choice — the science
that explains the choices that we make and how
those choices change as we cope with scarcity.
• Economics
Ancient Greek
Oikonomia : Management of a household or estate
Oikos : Household
Nomos : Law
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3. Definition
• ADAM SMITH (1776)
"an inquiry into the nature and causes of the
wealth of nations“
• KEYNES (1936)
The General Theory of Employment, Interest and
Money
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4. All about economics
• To learn a way of thinking
– Opportunity cost
– Marginalism
– Efficient markets – no free lunch
• To understand society
• To understand global affairs
• To be an informed citizen
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5. Economics – Industrial Engineering
Principle of
Economic
Operation
Research
Computer
Science
Mechanical
Engineering
Statistics
…
Industrial Engineering
design, improve, install the
integrated system of people,
materials, information,
equipment, energy
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6. The Method of Economics
• Positive economics studies economic behavior
without making judgments. It describes what
exists and how it works.
• Normative economics, also called policy
economics, analyzes outcomes of economic
behavior, evaluates them as good or bad, and
may prescribe courses of action.
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7. • Positive economics includes:
– Descriptive economics, which involves the
compilation of data that describe phenomena and
facts.
– Economic theory, which involves building models
of behavior.
• An economic theory is a general statement of
cause and effect, action and reaction.
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8. Comparison
Positive economics Normative economics
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9. MICRO - MACRO
MICRO
• Microeconomics is the
study of individual people
and businesses and the
interaction of those
decisions in markets.
• Studies:
– Prices and Quantities
– Effects of government
regulation and taxes
MACRO
• Macroeconomics is the study
of the national economy and
the global economy as a
whole.
• Studies:
– Average prices and total
employment, income, and
production
– Effects of taxes, government
spending, a budget deficits on
total jobs and incomes
– Effects of money and interest
rates
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10. Five Big Economic Questions
• What?
• How?
• When?
• Where?
• Who?
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11. The Circular Flow of Market Economy
http://www.lbcc.edu/Business/images/Econo
mics_circular_flow_cartoon.jpg
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12. The Circular Flow of Income and
Expenditur
http://www.swlearning.com/economics/cebula/images/A00_movieb.gif
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