Economics Defined

Economics is the study of how societies use scarce

resources to produce valuable goods and services

and distribute them among different individuals.
Samuelson and Nordhaus, Economics,2009.

Economics is the study of mankind in the ordinary

business life.
Alfred Marshall, Principles of Economics, 1890.

Subfields
Microeconomics is the branch of economics

concerned with the behavior of individual entities

such as households, firms and markets.

Macroeconomics is concerned with the overall

performance of the economy.

Problems in Microeconomics
Market forces of supply and demand
Consumer Choice
Firm Behavior and Organization
Market structure
Social welfare : balancing efficiency and equality
Design of tax system
Management of public goods and common resources

Problems in Macroeconomics
National Income
Economic growth and development
Inflation
Unemployment
Government budget deficit
Exchange rate
Interest rate and capital flow

Mankiws Basic Principles

Trade-offs
People face trade-offs.

Opportunity cost
The cost of something is what you give up to get it.

Mankiws Basic Principles

Marginal analysis
Rational people think at the margins.

Incentives
People respond to incentives.

Mankiws Basic Principles

Trade
Trade can make everyone better off.

Efficiency of Markets
Markets are usually a good way to organize

economic activity.

Mankiws Basic Principles

Government intervention
Government can sometimes improve market

outcomes.