Economics. L1.

So, what is economics?

Let's first answer what economics is not. 1)Not the study of money and getting
rich(althoug understunding can help with that) 2)Not the study of the stock
market

The famous economist Alfred Marsh defined economics as:

A study of man in the ordinary business of life. It inquires how he gets his
income and how he uses it. Thus, it is on the one side, the study of wealth and on
the other and more importnat side, a part of the study of man."

Examples of applied economics: 1) 18 year old decides whether to go to college or

not

2) A company deciding whether to produce smartphones or tablets and how

that's influenced by what we consumers want to buy

3)Government deciding whether to increase its spending when it's a recession

and if it's worth going into debt

A recession is when the economy becomes less active. Prices for goods go
down. People lose their jobs so unemployment increases. Inflation and
interest rates go down. Many company shares lose value. One definition is that
two quarters in a row when gross domestic product goes down is the start of a
recession.(The Great Recession happened from 2007-2009.)
Means lost benefit after you choose one option from several options. How useful
is the most valuable of the options that you didn't choose? Can be money, lost
time, pleasure or any other benefit

So we neef to get the most ouf of our limited resources and this is economics
COST VS BENEFIT We don't have infinite amount of resources. Scarcity means
we must make a choice.
Having the right incentive is a key. But the right incentives can be hard to figure
out.

Example: many universities used to get state money for each student they
enrolled(in Russia it's like this). That meant universities had financial incentives
to focus on recruiting as many students as possible, but not actually helping
them succeed once they were in class. So states have started changing the
incentives. Now more and more schools reward students for the number of
students that complete courses or get degrees. In some cases it worked. It helped
to increase their graduation rates.(those incentives can also backfire if they're
poorly designed-> university could push students through the program without
giving them a good education)

But incentives can help to solve more problems without adding more resources.
The only way to improve things - spend more money? Rather than spending
more money we neeg to make sure people have incentives to produce the most
e!ective care possible at the lowest cost possible. Perverse incentive

Macroeconomics and microeconomics

Study of economy as a whole, looks at the whole nation's
output(unemployment, interest rates, government spending and growth). The
direction of the overall economy

Macro answers questions like "Will unemployment rise if there's an increase in

taxes?" Crucial questions that economist must answer

Less than a half of all economists are macro economicsts

Learning economics will enlighten your mind and make you a more informed
decision maker.