Chapter 1: General Introduction

Basic concept: basic concepts, 3 basic questions of an economy, market and commanfd economy
Econ: what about, 10 principles
Econ model

Basic conepts
-Economy: comes from the greek word for “one who manages a household”
-Household: faces many decisions to allocate limited resoureces
-Society: faces decisions to allocate resoureces and output
-Entities in the economy: 3 basics:
Household=comsuner
Firm=producer
Gorvernment
-resoureces:everything economy need to ropuduce output(input)
land(natuaral resources)
Labour(L)-wages
Capital(K):physical capital: duoc dung truc tiep tao ra output-rent
Entrepreneurship: kha nang kinh doanh: own by owner of firm not ceo or
what-profit
-Scarcity means that society has limites resoureces and therefor canoot produce all the goods and
services people wish to have: 100% face scarcity

Three basics questions of an economy:

What to be produced: which and how many of the product
How are the goods to be produce and be used efficiently
For whom are the goods to be produced
Market(thi truong) and Command(menh lenh) economy
Market economy: private ownership of the means of production
Voluntary exchanges/contracts
Decentralised decision

Command(planned) economy: ke hoach hoa tap trung:

Gov own the factors of production
Gov officials determine when where how much is produced
Centralised decision

• ALL ECON IN THE WORLD NOW IS MIXED ECONOMY

• Economic: the study ò hơ society mangae ít scarece resource, eg

how people decide what to buy
how much to work save spend
how firms deicde how much to produce how many worker to hire
how society decide how to divide its resource between national defende, consumer
gooods, protecting the environ, and other needs

TEN PRINCIPLES Ò ECON

The principles of decision making:
-peop;e face tradeoffs
-the cost of any action is measures in terms of foregone opportunities
-rational people make decisions by comparing marginal costs and marginal benefits
-people respond to incentives
-opportunity cost

The principle of interactions among people are:

-trades can be mutually beneficial
-markets are ussually a good way of coordinating trade
-Govt can potentially improve market outcomes if the is aa market failure or if th market
outcome is inequitable

(3):
-Productivity í the ultimate source ò living standards
-Money growth is the ultimate source of inflation
-Society faces a short-run tradeoff between inflation and unemployment

Chapter 2: Microecon and MacroEcon

Microecon:
-the study of how households and firms make decisions
-and how they interact in markets
Macro:
-The study of economy-wide phenomenoa, including inflation, unemployment, econ
growth(,cpi)

Positive and Normative econ analysis

Positive statement:
-Attempt to describe the world as it is
-Descriptive
-Confirm or refute by examining evidence(có thể chứng minh qua bằng chứng vd: cái gì
đấy cause gò đấy)
Normative statements:
Attempt to prescribe how the world should be
Prescriptive(keyword: should)

->PS làm foundation cho NS

 Econ models:
-Assumptions simplify the complex world, make it easier to understand
-Ceteris paribus assumption: All other things being equal. The term to holding all other
variables constrant when one variable is changed
-econmist use models to study econ issues. A model is a highly simplified representation
of a more complicated reality

2 basic models:
• THE CIRCULAR-FLOW DIAGRAM

Tính tổng gdp lấy revenue hay spend hay 2 cái kia đều được, như nhau, bảo toàn

• The production possibilities frontier

–The production possibilites frontier(ppf):
A graph that shows the cpmbinations of the goods the econ can possibly produce
given the avail resource and avial technology
Vd: 2 goods: computer and wheat
One resource: labor(measured in hours)
Econ há hours per month avail for production

PFF EXAMPLE

Chapter 2: SUPPLY AND DEMAND

D: - willing/able to purchase khasc QuantityD like D but (at a certain price)

law of demand cause the demand curve to be downward sloping

Demand function:
*general demand function: QD=F(P of x cause t=movement along the D curve, other
factors shifts the D curve:P of other goods, Income, Taste, Expectation of buyers,
Numbers of buyers ...)

if Px change-> Qd change : movement tu diem A ve B, gia thay doi luong cau chu
khong phai cau
Increase in D-> D shift to the right

2 goods are substitues of an inccrease in pirve of one cause increase in demand for the
other

P of Complement tang -> D giam

normal I tang D tang>< inferior goods: I tang D giam

Engel Law/curve:
*) if D curve is linear
QD= a.D+b
-> inverse demand function: P=c.QD+d