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Title: MICROECONOMICS
Description: 1st year of economics studies of mine nice summary of beginning the economics and microeconomics.
Description: 1st year of economics studies of mine nice summary of beginning the economics and microeconomics.
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SESSION 1
BASIC CONCEPTS AND TECHNIQUES OF ECONOMICS
DEFINITION OF ECONOMICS
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Economics is the study of how people use scarce resources to satisfy needs and wants
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It is a study of the economy (production, distribution, exchange and consumption)
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Allows an understanding of the causes of changes in the economic environment
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STARTING POINT
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The starting point of economics is the issue of NEEDS and WANTS
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Survival needs (sometimes known as Basic or Primary
Needs) include water, food and shelter
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Wants are linked to people’s tastes, desires and preferences
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Acceptance needs can increase over time and vary between societies
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This means that once one level of wants
have been satisfied, then a new higher level kicks in
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A
resource is anything that can be used to produce something to satisfy human wants
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The two human resources are LABOUR
and ENTREPRENEURS and the two non-human resources are LAND and CAPITAL
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Labour refers to the mental and physical qualities of human beings; the entrepreneur or
enterprise is the organiser and modifier of the productive process; land refers to any
naturally occurring resource; capital is a man-made resource
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FOP’s have a quantity and quality
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Solutions to scarcity: (1) produce more resources, (2) reduce the desire for more and more
goods and services, (3) make resources more productive, and (4) choose between competing
uses
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The fundamental or basic economic problem refers to the SOCIETAL CHOICES made in the
light of scarcity
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Opportunity Cost is defined as the value of the NEXT BEST ALTERNATIVE FOREGONE
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PRODUCTION POSSIBILITY FRONTIERS
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A useful diagrammatical technique to illustrate the trade-off or opportunity cost of producing
different goods and services
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FREE GOODS
Free goods are those available to people without the expenditure of human effort or the
employment of other factors of production, such as the climate or the air we breath
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3 pure types: Market, Command and Traditional
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Sellers/Firms/Producers/Suppliers are profit-maximising and Buyers/Consumers are utilitymaximising
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Rationing – distributing resources and goods to the highest bidder
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Price and wage controls
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Stable social order
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HYBRID SYSTEMS: Mixed economy
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These economies have a twin allocative mechanism: the market and command
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THE METHODOLOGY OF ECONOMICS
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DEDUCTION – arguing from the general to the specific and from principles to facts
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INDUCTION – arguing from the specific to the general
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MODEL BUILDING – developing economic laws and hypotheses to explain economic phenomena,
CETERIS PARIBUS – “all other things being equal” – important assumption in order to isolate the
effect of variables
MARGINAL ANALYSIS – a technique used when moving from one situation to another, comparing the
marginal benefits with the marginal costs
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MACROECONOMICS – means far, large or general
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Title: MICROECONOMICS
Description: 1st year of economics studies of mine nice summary of beginning the economics and microeconomics.
Description: 1st year of economics studies of mine nice summary of beginning the economics and microeconomics.