Economics is the study of how society manages its scare resources Definition

Using limited resources to satisfy unlimited wants MacroEeconomics The study of economy - wide phenomena (inflation, unemployment, economic growth)
Two branches of Economics
Government MicroEconomics The study of how buyers and sellers make decisions and how they interact in market

Firm Economic agents Factual analysis

Household/Individual Positive analysis No personal judgement involved

Choose which of wants to satisfy Can be tested, can be proven or disproven

Opportunity cost
The limited nature of society's resources What is Scarcity? Approach in Economics
(whatever must be given up to obtain some items)
Trade - offs Economic problem Opinion - based analysis
Brandches of Economics
Nature resources Normative analysis Involves personal judgement or ideals
RENT Land
Raw materials Cannot be proven or disproven

Human services Qualitative method

WAGE/ SALARY Labor
Physical or intellectual Quantitative method

Equipments Economic resources Model A simplified version of reality that allow us to observe, understand, make predictions about economic behavior

INTEREST Machines Capital What is Economics? Includes: theory, assumption, equation, data

Factories Different assumptions

Economic models
Economists disagree
Combine all resources into the production of GAS Different opinions, value judgements, normative views about what policy should try to accomplish
PROFIT Entrepreneurial ability
Revenue - Cost Scientists trying to explain the world
Economists play roles
Policy advisors trying to help improve the world

Markets for goods and services

Markets for factors of production Types of markets

People face trade - offs
Financial markets
Decisions of threee agents
The cost of sth is what you give up to get it
What to produce? How people make decisions?
Rational people think at the margin
How to produce? Basic questions of Economics
People respond to incentives
For whom to produce?
Trade can make everyone better off

Ten principles of Economics How people interact? Markets are usually a good way to organize economic activity
The Government or central authority Command economy

Direct Economics activities through the price system: Governments can sometimes improve market outcomes
Businesses and consumers
- The interaction of buyers and sellers determines prices
- Each price reflects the good's value and the cost of producing
Adam Smith's Invisible Hand Market economy
A country's standard of living depends on its ability to produce GAS
- Maximize society's economic well-being Law of supply and demand Economic systems

How the economy as a whole works? Prices rise when the government prints too much money
Combine
Society faces a short - run trade - off between inflation and unemployment
Government takes care of people's needs Mixed economy

Marketplace take care of people's want