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Chapter 1-Introduction To Economics

introduction to economic

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467 views

Chapter 1-Introduction To Economics

introduction to economic

Uploaded by

NuriIzzati
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 16

Principles of Economics

Twelfth Edition

CHAPTER 1
INTRODUCTION TO
ECONOMICS

Dr. Nurul Syakima bt Mohd Yusoff

Copyright 2017 Pearson Education, Inc.

1-1

What is Economics
Economics The study of how individuals and societies
choose to use the scarce resources that nature and
previous generations have provided to produce, distribute
and consume goods and services.
The key word in the definition is choose.

Economics is a behavioral, or social, science.


Economics is the study of how people make choices.

Copyright 2017 Pearson Education, Inc.

1-2

Why Study Economics?


To Learn a Way of Thinking

Economics has three fundamental concepts:


a) Opportunity cost
b) Marginalism
c) Efficient markets

Copyright 2017 Pearson Education, Inc.

1-3

To Learn a Way of Thinking (1 of 3)


Opportunity Cost

opportunity cost The best alternative that we forgo, or


give up, when we make a choice or decision.
scarce Limited.

Copyright 2017 Pearson Education, Inc.

1-4

To Learn a Way of Thinking (2 of 3)


Marginalism

marginalism The process of analyzing the additional or


incremental costs or benefits arising from a choice or
decision.

Copyright 2017 Pearson Education, Inc.

1-5

To Learn a Way of Thinking (3 of 3)


Efficient MarketsNo Free Lunch

efficient market A market in which profit opportunities are


eliminated almost instantaneously.
The study of economics teaches us a way of thinking and
helps us make decisions.

Copyright 2017 Pearson Education, Inc.

1-6

To Understand Society
Industrial Revolution The period in England during the
late eighteenth and early nineteenth centuries in which
new manufacturing technologies and improved
transportation gave rise to the modern factory system and
a massive movement of the population from the
countryside to the cities.
The study of economics is an essential part of the study of
society.

Copyright 2017 Pearson Education, Inc.

1-7

To Be an Informed Citizen
To be an informed citizen requires a basic understanding
of economics.

Copyright 2017 Pearson Education, Inc.

1-8

ECONOMICS IN PRACTICE
iPod and the World
A sticker that says Made in China can often be
misleading.
The iPod is composed of many small parts, and it
is almost impossible to accurately tell exactly
where each piece was produced without pulling it
apart.
From an economics point of view, one often has
to dig deep to see what is really going on.

THINKING PRACTICALLY

1. What do you think accounts for where components of the iPod and Barbie are made?

Copyright 2017 Pearson Education, Inc.

1-9

The Scope of Economics (1 of 2)


Microeconomics and Macroeconomics

microeconomics The branch of economics that


examines the functioning of individual industries and the
behavior of individual decision-making unitsthat is, firms
and households.
macroeconomics The branch of economics that
examines the economic behavior of aggregatesincome,
employment, output, and so onon a national scale.

Copyright 2017 Pearson Education, Inc.

1-10

The Scope of Economics (2 of 2)


Microeconomics and Macroeconomics

Microeconomics looks at the individual unitthe


household, the firm, the industry. It sees and examines the
trees.
Macroeconomics looks at the whole, the aggregate. It sees
and analyzes the forest.

Copyright 2017 Pearson Education, Inc.

1-11

TABLE 1.1 Examples of Microeconomic and Macroeconomic


Concerns
Division
of Economics

Production

Prices

Income

Employment

Production/output
in individual
industries and
businesses
How much steel
How much office
space
How many cars

Prices of individual
goods and services
Price of medical care
Price of gasoline
Food prices
Apartment rents

Distribution of
income and
wealth
Wages in the
auto industry
Minimum wage
Executive
salaries
Poverty

Employment by
individual
businesses and
industries
Jobs in the steel
industry
Number of
employees in a firm
Number of
accountants

Macroeconomics National
production/output
Total industrial
output
Gross domestic
product
Growth of output

Aggregate price level


Consumer prices
Producer prices
Rate of inflation

National income
Total wages and
salaries
Total corporate
profits

Employment and
unemployment in
the economy
Total number of jobs
Unemployment rate

Microeconomics

Copyright 2017 Pearson Education, Inc.

1-12

ECONOMICS IN PRACTICE
Does Your Part-time Job Matter for Your Academic Performance?

Several studies of the effect of part-time jobs


on college grades help to sort out causality in
part-time job effects.
One study used data on final-year journalism
students academic achievements and wellbeing along with their employment reasons
and working hours to test the part-time
employment effects.

The overall results revealed strong negative


employment effects.

THINKING PRACTICALLY
1. Would the academic outcomes of university juniors change as they become university
seniors if they continuously pursue similar types of employment?

Copyright 2017 Pearson Education, Inc.

1-13

Economic Policy ( 1 of 3)
Four criteria are important in judging economic outcomes:
1. Efficiency
2. Equity
3. Growth
4. Stability

Copyright 2017 Pearson Education, Inc.

1-14

Economic Policy (2 of 3)
Efficiency

efficiency In economics, allocative efficiency. An efficient


economy is one that produces what people want at the
least possible cost.
Equity
equity Fairness.

Copyright 2017 Pearson Education, Inc.

1-15

Economic Policy ( 3 of 3)
Growth

economic growth An increase in the total output of an


economy.
Stability

stability A condition in which national output is growing


steadily, with low inflation and full employment of
resources.

Copyright 2017 Pearson Education, Inc.

1-16

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