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Co1 - Ch1 - Lec1 - ECN 3010 - What Is Economics - NAM Naseem PDF
Co1 - Ch1 - Lec1 - ECN 3010 - What Is Economics - NAM Naseem PDF
WHAT IS
ECONOMICS?
N.A.M Naseem, Department of Economics, UPM
© 2014
ECN 3010- Pearson Education
PRINCIPLES OF ECONOMICS
Definition of Economics
Economics
social science
choices that individuals (household) / businesses / governments
scarcity and the incentives that influence and reconcile those choices
N.A.M Naseem, Department of Economics, UPM
© 2014
ECN 3010- Pearson Education
PRINCIPLES OF ECONOMICS
Definition of Economics
All economic questions arise because
“we want more than we can get”
1. The things you can’t afford to buy if you purchase the
concert ticket.
2. The things you can’t do with your time if you attend
the concert.
N.A.M Naseem, Department of Economics, UPM
© 2014
ECN 3010- Pearson Education
PRINCIPLES OF ECONOMICS
The Economic Way of Thinking
How Much? Choosing at the Margin
To make a choice at the margin, you evaluate the
consequences of making incremental changes in the use of
your time.
The benefit from pursuing an incremental increase in an
activity is its marginal benefit.
The opportunity cost of pursuing an incremental increase in an
activity is its marginal cost.
If the marginal benefit from an incremental increase in an
activity exceeds its marginal cost (MB>MC), your rational
choice is to do more of that activity.
• marginal benefit from an incremental increase > marginal
cost
N.A.M Naseem, Department of Economics, UPM
© 2014
ECN 3010- Pearson Education
PRINCIPLES OF ECONOMICS
The Economic Way of Thinking
For Whom?
Who gets the goods and services depends on the incomes
that people earn.
Capital earns interest.
Entrepreneurship earns profit.
Labor earns wages.
Land earns rent.
People with large income will able to buy more.
“CELL = IPWR”