Beruflich Dokumente
Kultur Dokumente
Principle of Economics
Learning Objectives
At the end of the lecture class, students will be
able to:
1. Define the meaning of economics and several
economics terms
2. Understand 10 Principles of Economics
3. Provide comparison between different type of
economic system
WHAT IS
E-C-O-N-O-M-I-C-S?
Origin
The term "economy," from which we get "economics," comes most
directly from the Old French word "economie," meaning
"management of a household."
The French adopted the term from the Latin word "oeconomia,"
which was in turn derived from the Greek word "oikonomia."
Oikonomia came from the word "oikonomos," which separates into
"oikos," meaning house, and "-nomos" meaning managing.
The oldest recognized written work in the field of economics is
Oeconomicus, a book on farming and household management,
written by the Greek philosopher Xenophon.
In short,
one who manages
a household.
Micro
Production
Prices
Income
Employment
Production/Output
in Individual
Industries and
Businesses
Price of Individual
Goods and Services
Distribution of
Income and Wealth
Employment by
Individual
Businesses &
Industries
Macro
National
Production/Output
Total Industrial
Output
Gross Domestic
Product
Growth of Output
Aggregate Price
Level
Consumer prices
Producer Prices
Rate of Inflation
Minimum wages
Executive salaries
Poverty
National Income
Total wages and
salaries
Total corporate
profits
Resources ??
Resources Categories
Resources/Input
Goods
Production
Commodities
Services
Consumption
Value the
goods &
services
Opportunity cost
Opportunity cost
Nearly all decisions involve trade-offs. The
cost of something is what you give up to get it.
Rational people think at the margin. People
respond to incentives.
There
is no such thing as
a free lunch!
2.
3.
Bicycle v. butter
Food v. clothing
Leisure time v. work
Efficiency v. equity
Efficiency v. Equity
Efficiency means society gets the most
that it can from its scarce resources.
Equity means the benefits of those
resources are distributed fairly among
the members of society.
World Squash
Champion Nicol
David understands
opportunity costs
and incentives. She
decided to put on
hold her academic
interests to
concentrate on
squash where she
earns hundreds of
thousands of ringgit.
Psychology
ego id cognitive dissonance
Law
promissory estoppel torts venues
Economics
supply opportunity cost elasticity
consumer surplus demand
comparative advantage deadweight loss
2011 Cengage South-Western
ceteris paribus
Ceteris Paribus
Other-Things-Equal
ceteris
paribus,
or all
else
equal,
assumption, economists study the relationship
between two variables while the values of
other variables remain constant.
The Latin phrase "ceteris paribus" and its use
in economic commentary are centuries older
than the formal discipline of economics.
MARKETS
FOR
GOODS AND SERVICES
Firms sell
Goods
Households buy
and services
sold
Revenue
Wages, rent,
and profit
Goods and
services
bought
HOUSEHOLDS
Buy and consume
goods and services
Own and sell factors
of production
FIRMS
Produce and sell
goods and services
Hire and use factors
of production
Factors of
production
Spending
MARKETS
FOR
FACTORS OF PRODUCTION
Households sell
Firms buy
Labor, land,
and capital
Income
= Flow of inputs
and outputs
= Flow of dollars
Firms
Produce and sell goods and services
Hire and use factors of production
Households
Buy and consume goods and services
Own and sell factors of production
Factors of Production
Inputs used to produce goods and
services
Land, labor, and capital
Quantity of
Computers
Produced
3,000
C
A
2,200
2,000
B
Production
possibilities
frontier
1,000
300
600 700
1,000
Quantity of
Cars Produced
Efficiency
Trade-offs
Opportunity cost
Economic growth
Quantity of
Computers
Produced
4,000
3,000
2,300
2,200
G
A
600 650
of
1,000 CarsQuantity
Produced
1.Laissez-faire economy
Characteristics
ii. Inequality - wide gap between the rich and the poor .
enforce
contracts
Consumers
Characteristics
NORMATIVE
Governments should be allowed to
collect from tobacco companies the
costs of treating smoking-related
illnesses among the poor.
NORMATIVE
Ministry of Finance
http://www.treasury.gov.my