A brief description of the definitions of micro-and macro economics. Exploration of the two big questions that plague economists. Discussion on the economic way of thinking and description of it being a social science.
What is Economics
Definition of Economics
Economic questions arises because we want more than what we can get
What we get is limited by time, income, and prices we must pay
Scarcity – inability to satisfy wants
Due to scarcity – we must choose available alternatives
This is influence by the incentives we have.
Incentive – is a reward that encourage an action or a penalty that discourage
one
Economics – social science that studies choices of individuals, businesses,
governments, and entire societies. They cope with scarcity and incentives
that governs these choices.
Microeconomics
Microeconomics – Study the choices of individuals and businesses, how it
interacts with market and influence of governments.
Macroeconomics
Macroeconomics- study of performance of national economy and global
economy.
Two Big Economic Questions
How do choices end up determining what, how, and for whom goods and
services get produced
When do choices made in pursuit of self-interest also promote the social
interest?
What, How, and for Whom?
Good and services – Objects that people value and produce to satisfy
human wants.
What? What we produce changes over time. What determines the quantities
of maize, DVDs, and haircuts and other items we produce.
, How? Goods and services are produced by using productive resource that
economics calls factors of productions.
Group of factors of productions:
o Land
Natural resources – metal ores, oil, gas and coal, water and air
Includes renewable and non-renewable resources
o Labour
Labour – Work and time and work effort that people devote to
produce goods and services.
Quality of labour depends of human capital.
Human Quality – Knowledge and skill people obtained through
education, on-the-job experience and work experience.
o Capital
Capital – instruments, machines, buildings that businesses use
to produce goods and services.
Financial Capital – (money, stocks and bonds). Plays a NB role
in enabling businesses to borrow fund their capital
o Entrepreneurship
Entrepreneurship – The human resource that organize labour,
land, and capital.
Entrepreneurs comes up with new ideas about the production of
goods and services, makes business decisions and bares the
risks.
For Whom?
o The income people earn determines which good and services they get.
o People earn by selling the services of the factors of production they
own.
o We can determine who consumes the goods and services by looking at
the percentage of the total income earned by different groups of people
When is the pursuit of self-interest in the Social Interest?
You make choices that are in your self-interest – choices that you think are
best for you
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