Unit 1: Topic 1- Introduction to Economics

💥Introduction to Economics💥

Unit 1- Basic Economic Concepts🔑

Scarcity- The state of being scarce or in short supply; shortage, fundamental problem that all society face.

Economics- Knowledge concerned with the production, consumption, transfer of wealth.

1st Pillar of Economics Wisdom-  Nothing in our material world can come from nowhere, nor can it be free; everything in our economic life has a source, a destination and a cost that must be paid - by someone. 

Five Key Economics Assumptions- 

• Society's wants are unlimited, but all resources are limited (scarcity). 
• Due to scarcity, choices must be made. Every choice has a cost (trade-off). 
• Everyone's goal is to make choices that maximize their satisfaction. Everyone acts in their own "self-interest ".
• Everyone makes decisions by comparing the marginal cost and marginal benefits of every choice.
• Real- life situations can be explained and analyzed through simplified models and graphs.

Marginal- Change in quantity used of goods and services

• Marginal Cost -  The cost added by producing one additional unit of product or service.
• Marginal Benefit- Person receives from consuming an additional unit of goods or services. 

Ceteris Paribus- With conditionals remaining the same.

Opportunity Cost- The loss of potential gain from other alternatives when one alternative is chosen.

Macroeconomics- The part of economics concerned with large scale or general economics factors; such as interest rate and national productivity. 

Microeconomics- The part of economics concerned with single factors and effects of individual decisions.

Utility- The state of being useful, profitable or beneficial.

Allocate-  Analysis of how scarce resources are distributed among producers, and how scarce goods and service are apportioned among consumers. This analysis takes into consideration the accounting cost, economic cost, opportunity cost, and other cost of resources and goods and services.

Price- Amount of money that has to be paid to acquire a product.

Cost- The total cost of choosing one action over another.

• Economic Cost- Includes the accounting cost: actual funds spent carrying out an action.
• Opportunity Cost- Amount of money that could have been made by using funds and other resources.

Investment- Purchase of goods that are not consumed today but are used in the future to create wealth.

Goods- Satisfy human wants and provide utility.

• Consumer Goods- Satisfy consumers wants and needs.
• Capital Goods-  Items used to create other items.

Services- Performed for someone else. 

Explicit Cost- Direct payment made to those running a business. Ex.(Wage, Rent)

Implicate Cost- No actual payment is being made.

Positive vs. Normative Economics

• Positive Economics-  (Factual)  Claims that attempt to describe the world as is. Very descriptive. Ex. (Minimum wage laws cause unemployment.
• Normative Economics- (Opinion)  Claims that attempt to prescribe how he world should be. Ex. (Government should raise minimum wage.)

Wants- Desire of the citizen.

Needs- Requirement for survival. (Food, Water, Shelter)

Shortage- Quantity demanded is greater than quantity supply. (Price goes ↑)

Surplus- Quantity supply is greater than quantity demand. (Price goes ↓)

Factors of Production

• Land- Natural resources
• Labor- Study of economic behavior of employers and employees in response to changing prices, profits, wages, and working conditions.
• Capital 
• Human Capital- Knowledge and skills a worker gains through education and experience.
• Physical Capital- Human made objects used to create other goods
• Entrepreneurship- Risk taker and inivative
• and services.