John Maynard Keynes - the most influential economist of this century.

- His response: o the ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. o the ideologies of the modern world which compete for the minds of men have been shaped in substantial measure by the great economists of the past. o world leaders invoke the advice and policy prescriptions of economists. o there are economic issues with which political leaders must contend with an on which they must assume tenable positions like unemployment and inflation, economic growth, and etc. o most of the specific problems of the day have important economic aspects. o an understanding of the overall operation of the economy puts the businessman in a better position to formulate his policies. Economics - came from the Greek word oekonomia, which means management of the household. - started as home economics. - it studies the battle of matching scarce resources against vast needs and wants-scarcity. can be defined as the science that studies how men work to overcome scarcity. some books defined it as study of exchange and production. is the social science which examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants. as a social science is concerned with the production, distribution, exchange and consumption of goods and services.

Two major fields of standard economics 1. Microeconomics - can be also called as the price theory. it refers to a smaller scope, the individual decision-making units like producers and consumers. - it explains how the interplay of supply and demand in competitive markets creates a multitude of prices, wage rates, profit margins and rental changes. 2. Macroeconomics it refers to a larger scope, the whole economy. deals with modern explanations of national income and employment. Thomas Carlyle - defined economics dismal science. W. Stanley Jevons - defined economics as the mechanics of utility and self-interests. Alfred Marshall - from its most influential textbook in economics, Principles of Economics, defined economics as the study of mankind in the ordinary business of life. Lionell Robbins - said that Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.

Scarcity - means that people want more than is available. - it requires choice. - the fundamental assumptions of scarcity, according to Utopians, abundance and elimination of want. - the alternative way to eliminate scarcity is the way of Buddha, which is to eliminate want. James Buchanan - an economist who disagrees with the statement that whatever is worth doing is worth doing well. Importance of studying economics: 1. Economics deals with vital current problems such as inflation, unemployment, monopoly, economic growth, population and poverty. 2. The accomplishments of economics have established it as most successful social science. 3. Economics is attractive because of its use of the scientific method for the study of people 4. Knowledge of economics and understanding of current economic institutions and problems are essential in certain occupations. 5. Economics and economic issues may be your avocation. Production possibilities curve/frontier - is a curve that shows the various alternative combinations of two commodities that a nation can produce by fully utilizing all its factors of production with the best technology available to that particular nation. Opportunity costs - refers to the amount of one good (X) that must be given up or sacrificed to release just enough resources to produce each additional unit of another good (Y). Increasing cost - refers to the increasing amount of one good (X) that must be given up or sacrificed to release just enough resources to produce increasing unit of another good (Y). Full employment - a situation where all those who are looking for work, ready to work, possess the necessary skills can find work. Full production - is the maximum amount of goods and services that a nation produces when all resources are fully utilized. Production - the combination and transformation of various factors/inputs into fully finished items of output Factors of production - inputs labor and capital to produce output of goods and/or services. - Land, Labor, Capital, Entrepreneurial Ability Capital - the stocks of buildings, plant, equipment, houses, consumer durables goods, and inventories. Income - the total payment made for the services of the factors of production. Nominal Income - amount of money received from a productive activity Real Income - goods and services that money income can buy. Investment - the purchase of new buildings, plant and capital, houses, consumer durable goods or inventories.

Money - anything that is generally acceptable as a medium of exchange. Wealth - anything that is scarce, material, possesses value, and has utility. Utility - is the economist jargon for satisfaction Value in use - refers to the quality of a good to satisfy individual want. Value in exchange - refers to monetary value. Economic efficiency - is the maximum possible production of goods and services generated by the full employment of the resources of the economy. Technical efficiency - occurs when the inputs used in a production function produce the maximum output for a given time period. Positive economics - deals with casual relationships; answers: what is, what was, what will be. Normative economics - deals with economic relationships ought to be/should be.; answers: what should be, what ought to be. Political System - refers to the system of government in a nation. Collectivism - refers to a political system that stresses the primacy of collective goals over individual goals. Individualism - opposite of collectivism; it refers to a philosophy that an individual should have freedom in his/her economic and political pursuits. - stresses that the interests of the individual should take precedence over the interests of the state. - gives emphasis on the importance of guaranteeing individual freedom and self-expression to welfare of the society Democracy - refers to a political system in which the government is by the people, and for the people. Totalitarianism - is a form of government in which one person or political party exercises absolute control to all. Economic System - the way in which economic units and institutions are organized to solve the fundamental problems of society. Market Economy - Economic planning, refers to a coordinating mechanism outside the mechanisms of the market. - One of its major advantages of a free-market economy is that it functions automatically. Command Economy - Command planning, as a national policy is the direction or control of key economic decisions by a central government authority. Mixed Economy - certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning.