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

5. Macro (Aggregates- Industry, not firm)
Normative (Value judgments- “What ought to be”)

8. 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

9. economics
Theoretical
economics
Positive
economics
Normative
Economics
Applied
economics
Macro
economics
Micro
Economics

10. 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

11. 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

12. wants
Societal
activities
satisfaction
wealth

13. 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

14. 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

15. 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

16. 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

18. 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

20. 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

23. 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