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ECONOMICS Queen of all social studies. It has a unique foundation THE ECONOMICS HAS TWO MAIN FOUNDATION 1.

1. RESOURCE scarce or limited 2. HUMAN NEEDS AND WANTS unlimited ECONOMICS is a branch of social sciences that deals with the allocation and distribution of limited resource in order to satisfy unlimited human needs and wants. The word Economics comes from the Greek word oikos and nomus - Oikos means household - Nomus means management Xenophon coins the word oikonomikos THE TWO MAIN BRANCHES OF ECONOMICS 1. MICROECONOMICS deals supply and demand, elasticity, consumption, production, markets. 2. MACROECONOMICS deals GDP, inflation, unemployment, fiscal policy, monetary policy, exchange rates, and trade. 10 PRINCIPLES OF ECONOMICS by N. Gregory Mankiw 1. 2. 3. 4. 5. 6. People face trade-offs. The cost of something is what you gave up to get it. Rational people think at a margin. People respond to incentives. Trade can make everyone better-off. Markets are usually a good way to organize economic activity. Why USUALLY ? a. Market imperfection b. Imperfect information c. Externalities Government can sometimes influence market outcomes. Why SOMETIMES ? a. Public Goods non-rival, non-exclusive free- rider problem A countrys standard of living depends on its ability to produce goods and services. Measures by GDP Prices rise when government prints too much money. Society faces between inflation and unemployment.


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Three Types of Economy 1. Traditional WEALTH of NATION by Adam Smith a. Role of Capitalism b. Laissez Faire

2. Command DAS KAPITAL by Karl Marx a. Government Provides b. Communism and Socialism c. Without Capital d. 1930s great depression massive downfall 3. Mixed Markets a. General Theory on Employment Interest and Money by John Maynard Keynes

Four Decisions that Economy should make: 1. Consumptions 2. Productions 3. Distributions 4. Growth over time Four Factors of Production 1. 2. 3. 4. Land - Rent Labor - Salary Capital - Interest Entrepreneurship - Profit

Four Basic Economic Questions 1. What to produce? 2. How to produce? 3. For whom to produce? 4. How much to produce?

The Law of Demand -as Price Quantity -as Price Quantity The Law of Supply -as Price Quantity -as Price Quantity Six Factors that affects demand 1. Relative Goods substitutes or complements 2. Taste and preferences 3. Change in income 4. Change in population 5. Occasional or seasonal production 6. Future price expectations Six Factors that affects supply 1. Technology 2. Optimizing Production factors 3. Future expectations 4. Weather conditions 5. Government policy 6. No. of sellers in the markets