econ 1

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What is ECONOMICS

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Economics is…..

• The study of how a person or society meets its unlimited needs and wants through the effective allocation of resources (Paul Samuelson, Nobel laureate in economics, 1970)

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• A science that deals with the study of the production and distribution of a country’s resources.

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• A social science that deals with the study of how people can be influenced by the economic system around them.

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Economics is the study of mankind in the ordinary business of life.

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• Economics is a science that deals with the study of human behaviour as a relationship between ends and scarce means which have alternative uses.

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Economics is the branch of science that teaches human beings how to satisfy their unlimited material needs and wants in the face of scarce or limited resources.

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The Study of Economics revolves around the following concepts

Resources are always limited

People’s wants and needs are

unlimited

Resources must be properly

allocated

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Scope and Method of Economics

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History- deals with the study of events that happen in the world and the formation of theories that explain why

certain things happen

Psychology- study of individual behaviour and the mind.

Social Anthropology- examines all characteristics that make us what we are;

talks about how people relate them from past to

present



Political Science- study of government, public policies, and political

systems.

Sociology- the study of how societies behave and investigate how society is structured and how it functions.

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Branches of Economics• The branch of economics that deals with the

behaviour of the decision-making units in society-the household and firms, and with grouping of similar related firms, called industries.Microeconomics

• Deals with the larger aspects of a nation’s economy.• Looks into a national income, aggregate demand, supply,

overall price level of goods & services, money supply & interest rates, government revenues & expenditures, & the unemployment rate of the whole country.Macroeconomics

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Six distinct aspects of the two approaches:

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Units of Study

Micro- individual

consumers, producers, workers, traders.

Macro- aggregate units such as state,

national or international economy

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Activities

Micro- optimization

and maximization of personal gains and

profits

Macro- long-term growth, maintenance of high levels of production

and employment

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Origin

Micro- emerge on

the demand side of

consumer’s choices

Macro- problems of long-term

growth depend upon the supply of

productive resources.

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Conditions

Micro- approach is functional

under static conditions &

small time intervals

Macro- approach is functional

under dynamic

conditions & complex long-run changes

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Methods

Micro- concerned with small

adjustments, for which the application of

a marginal method is suitable

Macro- deals with complex,

dynamic changes

inviting the use of

advanced mathematical techniques.

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LevelsMicro- adjustments in resource allocation are made in response to changes in relative prices of goods & services. Total economic activities is considered to be constant

Macro- attempts to find the conditions of long-term expansions in

output as a whole,

assuming relative prices as constant (or

significant)

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Methods of Economics• Concerned with the explanation of economic concepts &

how economic systems operate without making any judgment.

• It is sometimes defined as the economics of “what is”.Positive Economics

• Also called policy economics.• Prescriptive approach to economics, providing

suggestions of formulating policies that address economic issues. It answers questions like: “What is the most important thing that can be done to promote growth of the economy”

Normative Economics

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Steps in the Scientific Method of addressing social issues

1. Identify the problem2. Analyze the

problem4. Evaluation of

alternative solutions

5. Implementation of the best solution

3. Give possible alternative solutions

6. Evaluation of the result

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Fields of Economics

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Field Concept1. Public Economics Studies the economic

impact of the government’s monetary and fiscal policies.

2. International Economics

Focuses on the global economy, specifically on trade and investments among countries



3. Labor Economics Discusses the theory, state, and value of labor in a country’s economy as well as issues such as wages, employment, and unemployment

4. Industrial Organization Primarily concerned with the structure of the market, the role of the government in the economy, and the regulation against monopolies.

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5. Agricultural Economics Gives importance to the agricultural sector of the economy, particularly the production of crops and livestock.

6. Econometrics Uses data, statistics, or mathematics to support economic theories.

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7. Development economics/Economic Development

Studies the economic situation of developing countries such as those in Africa, Asia, and Latin

8. Urban and Regional economics

Studies the proper use of land relation to economic activities.

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Famous Foreign and Local Economists

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ADAM SMITH

The formal study of economics began in 1776 when Adam Smith wrote: An Inquiry into the Nature and Causes

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Discuss for 20 points

How can economics be applied to your daily lives as:

a. consumerb. student, and;c. member of your family

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econ 1

Economy & Finance

study of economics

method of economics

branch of economics

positive economics

policy economics

economy normative economics

study of mankind

psychology study