9 THINGS YOU

SHOULD KNOW
ABOUT ECONOMICS
ANDRADA,JUSTINE BRYLL NIETES
11 HUMSS A
 Tune: Johny Johny Yes Papa

HUMSS A HUMSS A
LEARN ECONOMICS
ARE YOU FAMILIAR?
YES,OF COURSE
TELLING LIES?
NO,OF COURSE
OPEN YOU MINDS!
HA! HA! HA!

ECONOMICS SONG
 Macroeconomics is the study of the economy as
a whole. It focuses on aggregate numbers and data
for entire countries. Thus, it provides a broad
perspective. Microeconomics on the other hand is
the study of small economic units. It scrutinizes
individuals and their decision making from a close
perspective. Even though the two branches cover
different areas of economics for the most part, they
are highly interrelated.

1) Microeconomics vs Macroeconomics
 People constantly face trade-offs. They
have to make choices due to scarce
resources. As a result, they can’t get
everything they want, so they have to pick
certain things over others. Opportunity costs
describe the value of the next best
alternatives that are given up during this
process in order to get something else.

2) Opportunity Costs
 The price of a good or service is determined by
its supply and demand. In most cases an
increase in demand results in an increase in
price, given that all other factors remain
unchanged. Meanwhile an increase in supply, all
else equal, results in a decrease in price. In the
long run, the market reaches an equilibrium price
where supply equals demand.

3) Supply and Demand

 If an economic actor has the ability to
produce a good or service at lower opportunity
costs than another actor, they are said to have a
comparative advantage. In the presence of
comparative advantage, all actors can benefit
from cooperation and trade if they specialize in
producing and exporting the goods and services
they can produce more efficiently than others.

4) Comparative Advantage
 In most cases, the satisfaction people get
from consuming a certain good or service
decreases as its supply increases. At some
point, the marginal utility of consuming an
additional unit may even become negative
(i.e. completely unfavorable). This concept is
often used by companies to set prices.

5) Diminishing Marginal Utility

 Economic growth is necessary to satisfy
people’s desire for an ever increasing
standard of living, to redistribute wealth, and
to advance new technologies. It is measured
by the change in GDP, the total value of all
final goods and services produced within an
economy over a set period of time.

6) Economic Growth and GDP

 Externalities are the positive or negative
consequences of economic activities
experienced by unrelated third parties. They
can arise either on the production or on the
consumption side. In most cases, externalities
result in market failure that can only be
avoided by imposing some kind of regulation
to internalize them.

7) Externalities
 Most economies experience a moderate
level of inflation. That means, the overall price
level increases, which is equal to a decrease
in the purchasing power of money. Deflation
on the other hand is less common. It describes
a decrease in the overall price level, i.e. an
increase in the purchasing power of money.

8) Inflation and Deflation

 Whenever a bank loans money to someone,
it will expect to receive interest in return. This
way it can be compensated for its opportunity
costs and the risk of not getting the money
back. Interest rates define how much people
(or institutions) have to pay to get a loan.
Hence, they have a significant impact on all
monetary transactions.

9) Interest Rates
 Tune: Johny Johny Yes Papa

HUMSS A HUMSS A
LEARN ECONOMICS
ARE YOU FAMILIAR?
YES,OF COURSE
TELLING LIES?
NO,OF COURSE
OPEN YOU MINDS!
HA! HA! HA!

ECONOMICS SONG