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Summary Introduction to Economics and Business

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Hello, this is a summary for the first years course Introduction to Economics and Business on the Radboud University. I included all lectures and subjects in it. It is 14 pages and has (in my opinion) all of the important aspects of the course. Good luck studying!

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  • April 24, 2024
  • 14
  • 2023/2024
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Introduction to Economics and Business - Radboud University


Introduction:

Economic growth is measured in GDP and can exist because of;
- Productivity growth
- Physical and intellectual property rights
- Capitalism
- Want of humans to be productive and efficient due to incentives

Efficiency = the size of the economy or average income
Inequality = the distribution of the economy

Consequences of incentives:
- People abuse the system
- Incentives could cancel eachother out
- People do not care about the risk of the bank

Opportunity costs = implicit costs = net value

The economic problem
- What should be produced
- How much needs to be produced
- How is it produced
- Who should receive the product

Sunk costs fallacy = wrongly taken, or not taking, sunk costs into account
Diminishing marginal utility= the second product gives less happiness
Marginal analysis = What is the optimum quantity of a choice
(consists of marginal revenue and marginal costs)
Capitalism as an invisible hand = prices influence OC and choices

Maximum efficiency = marginal costs = marginal benefits

MAximum efficiency = where the marginal cost is the lowest
Most efficient point = closest to where marginal benefits are higher than marginal costs


Option A Option B


Explicit costs Direct payment A Direct payment B

Implicit costs (OC) OC(A) = WTP(B) - ExC(B) OC(B) = WTP(A) - ExC(A)

Economic costs ExC(A) + OC(A) ExC(B) + OC(B)

Economic rent WTP(A) -EcoC(A) WTP(B) - EcoC(B)
Trade and exchange

, GDP= sum of all income of all citizens OR the sum of all value added
GDP per capita = total value of economy / amount of people (productivity)
Real GDP per capita = GDP corrected by inflation
PPP = purchasing power parity -> indicates income

Problem using GDP = only includes products and services that we buy or sell. -> inadequate
measure of economy. Also when wealth is destroyed it does not decrease or renting for
example does in increase GDP


PPF = Production Possibility Frontier
Aim: show advantages when the production and exchange changes
- Constant line means constant OC
- Not constant means OC are increasing
- Trade and exchange cause the PPF to shift outward because there can be produced
more in the same time/ with the same resources (welfare-enhancing effect)

Autarky = no trade and lot of specialization
Exchange in the market;
- Stimulates productivity growth through specialization
- Creates more welfare
- Less opportunity costs

Absolute advantage = can produce more
Comparative advantage = can produce at a lower opportunity cost

When the price is between the OC of both producers, trade
It causes specialization

AA = both producers should produce what they are the best at and then trade to get the
optimum quantity of goods in the most efficient manner
AA in both products-> not trade




Markets

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