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Basic economics 2

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Basic economics 2

  1. 1. Basic Economics Mr. PhakdhavattRungruangwitchakul MBA, Northeastern Illinois University Bachelor of Arts, Assumption University panthanun@hotmail.com
  2. 2. Grading• 50% on class attendance, class participation, and class discussion• 50% on final exam
  3. 3. Course Outline1. Basic Economic2. Demand and Supply3. Basic Macroeconomic4. 3 major concerns on Macroeconomic5. Money6. Trading7. Market Integration - AEC
  4. 4. Economics is ……………. The study of how individuals and society choose to use the scare resources that nature and previous generations have provided. The study of how human beings coordinate their wants anddesires, given the decision making mechanism, social customs, and political realities of the society (how to make a best choice)
  5. 5. Why study economic?• To learn a way of thinking• To understand society• To understand global affair• To be an informed citizen.
  6. 6. Microeconomics – The branch of economics that examines the functioning of individual industries and the behavior ofindividual decision making units – that is firms and households. Macroeconomics – The branch of economics that examinesthe economics behavior of aggregates income, employment, and output on a national scale.
  7. 7. Scarcity – exists because individuals want more than can be produced. - means the good available are too few to satisfy individuals’ desires.
  8. 8. Opportunity Cost – the benefit that you might have gained from choosing the next best alternative. - the benefit forgone of the next best alternative to the activity you have chosen. - “There ain’t no such thing as a free lunch.”
  9. 9. Marginal Cost (MC) –the additional cost over and above costs already incurred.Marginal Benefit (MB) – the additional benefit above and beyond what has already derived. MB > MC, Do it MB < MC, Don’t do it
  10. 10. Demand– want, a willingness, ability to pay.- quantities of a good that will be brought at various price per unit of time. The law of demand – change in price, change in quantity. Price Quantity  Price Quantity
  11. 11. Shift in demand curve 1. Change in society income (Normal good & Inferior good)2. Change in the price of related goods. (Substitutes & Compliments) 3. Change in consumer tastes 4. Change in consumer expectation 5. Change in taxes and subsidies
  12. 12. Supply– how much a good a seller is willing to sell atvarious prices, per unit of time, other things constant. The law of supply – change in price, change in quantity supplied. Price Quantity Price Quantity
  13. 13. Shift in supply curve 1. Change in the price of inputs 2. Change in technology3. Change in supplier expectations 4. Change in taxes and subsidies
  14. 14. Equilibrium – occurs when quantity demanded equals quantity supplied, therefore there is no tendency for price to change.
  15. 15. Price $8.00 $8.50 $9.00 $9.50 $10.00 $10.50 Quantity Demand 3 3 1 0 0 0 8 7 6 3 2 1 6 5 4 3 0 0 10 9 7 6 4 2 Quantity Supply 0 1 2 3 4 6 2 3 3 4 6 7 0 1 2 3 5 6 1 1 2 2 3 5
  16. 16. • ( )• ( )•
  17. 17. 1. ( ) ( )
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  19. 19. 2: ( )
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  21. 21. 1: ( )
  22. 22. 2: ( )
  23. 23. 3.
  24. 24. 1:
  25. 25. 2:••
  26. 26. Macroeconomics – The branch of economics that examines the economics behavior of aggregates income, employment, and output on a national scale.Economic Growth – an increase in the total output of an economy, mostly from 2 important sources; the accumulation of capital and technological advanced.
  27. 27. The circular flow diagram
  28. 28. The 3 market areas:1. The goods and services market: Firms supply goods and service from the market. Household, government, firms demand goods from the market.2. The labor market: Household supply labor. Firm and government demand labor.3. The money (financial) market: Household supply funds. Firms, the government, and the rest of the world engage in borrowing (demand) and lending (supply).
  29. 29. Gross Domestic Product (GDP) – the total market value of all final goods and services produced within a given period by factors of production located within a country.
  30. 30. GDP )
  31. 31. Gross National Product (GNP) -the total market of all final goods and servicesproduced by factors of production owned by a country’s citizen. ( GDP
  32. 32. The role of the government in the Macroeconomic• Fiscal policy – government policies concerning taxes and spending• Monetary policy – the tools used by the Federal Reserve to control the quantity of money, which is in turn affects interest rate.
  33. 33. • Reserves (Actual reserve) -• Required reserve ratio (RRR) - %• Discount Rate -• Open market operation -How the Federal Reserve controls the money supplyIf RRR  Supply  ability to create money by making loansIf RRR  Supply  ability to create money by making loansDiscount Rate  Commercial banks borrow  loansDiscount Rate  Commercial banks borrow  loans
  34. 34. 3 major concerns on macroeconomic : 1) Output growth 2) Unemployment 3) Inflation and deflation Output growth– the increase in nation’s aggregate output which is usually the objective of the government.
  35. 35. 4 Phrases of business cycle:1. Peak – when real GDP reached its maximum at full employment.2. Recession- from a peak down to a trough during which output declines for 2 consecutive quarters, employment fall.3. Trough – when real GDP reached its minimum after falling recession.4. Expansion – from a trough up to a peak.
  36. 36. Unemployment rate- the percentage of the labor force that is unemployed.
  37. 37. Population 16 years of age or olderNot in the labor Labor force force Employed Unemployed
  38. 38. Inflation – an increase in the overall price level.Deflation – a decrease in the overall price level.
  39. 39. Trade Surplus – the situation when a country exports more than its import.Trade Deficit – the situation when a country imports more than its exports.
  40. 40. An overview of money Money – means of payment or medium of exchange , a store of value, or a unit of account A modern banking systemBanks borrow from individuals or firms with excess funds and lend to those who needs fund. Bank’s assets are its loans, Bank’s liabilities are deposits Asset – Liabilities = Net Worth
  41. 41. Bank of Thailand (BOT)1.2.3.4.5. (Clearing interbank payment)6.7.8.9.
  42. 42. (government revenue) (government expenditure) (government debt or public debt) (fiscal policy) (financial administration) 1. (Allocation Function) 2. (Distribution Function)3. (Stabilization Function)
  43. 43. 1. 2. 3. - - -
  44. 44. 
 (Budget)
1. (Surplus Budget)
2. (Balanced Budget)
3. (Deficit Budget)
  45. 45. Exchange rateThe ration at which two currencies are traded.The price of one currency in terms of another. Trade Barriers: 1. Tariff – a tax on import 2.Export Subsidies – Government payments made to domestic firms to encourage exports 3. Dumping – a firms sale of products on the world market at prices below its own cost of production 4. Quota – a limit on the quantity of imports
  46. 46. Economic Integration European Union (EU) US –Canadian Free Trade Agreement North America Free Trade Agreement (NAFTA) Asean Economic Community (AEC) Asean, , , , , , , , , Euro Zone ,
  47. 47. • AEC Blueprint AEC• AEC single market) free flow)
  48. 48. • AEC ASEAN)

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