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Chapter 1 Economics
Defined
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Current Economics Issues explores today's unique economic situation.
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Editors Notes
A.
B. McConnell Economics Books, including the 18th edition,
are one of many sources of material included in this chapter.C. Our Current Events Internet Library has an interesting economics section.
I. Basic Terms
A. Economics is the social science
concerned with the use of scarce resources like land and labor
to fulfill unlimited human wants.
B. Resources are the inputs, want satisfaction is the
output
C. Key Concepts
1. Scarcity of resources
results in the need for choices by participants.
2 Participants, buyers
and sellers, exhibit purposeful behavior to enhance their own rational
self interest.
3. Marginal analysis
where the change in benefit received is balanced with the change in cost is a
common purposeful behavior.
D. Economic methodology
1. Positive
Economics
a.
What something is
b.
Objective, can be measured
c.
Example: measuring disposable personal income which is an
individual's salary after taxes
2. Normative
Economics
a.
What something ought to be
b.
Subjective, difficult to measure
c.
Requires value judgments by citizens, Political Action Committees (PAC's),
politicians, economists, etc.
d. Examples: should the minimum wage be increased,
should defense spending increase and social spending be lowered
3. Descriptive
Economics
a.
Looking at the real-world to develop Economic Theory
b. Economic
Theory
1. Generalizations concerning economic behavior based upon
real-world observations, empirical by nature
2. Economic theories are objective "positive economics"
3. Assumes behavior is rational and economic (self-serving)
4. Example: as the price of a product increases, consumers tend to buy less
c. Economic Policy
1. Application of economic theory to solve economic problems
2. Economic policies are subjective, "normative economics".
3. How society makes economic choices such as in the 1980's when
a. spending
for the elderly (Social Security) increased
b. spending for children
(Head Start) decreased
d. Economic
Model
1. A simplified representation of real-world economic activity
2. Requires
Ceteris Paribus: Latin for holding other
economic variables constant
3. Models such as the Production Possibility Curve explained in the next chapter
provide
a simplified description of how some aspect of an economy works.
E.
Economic Glossary from AmoswebF. Economics The Library of Economics and Liberty has a concise economics Encyclopedia at the bottom of the page.
G. Our Economics Learning Center has information for students, teachers, an professionals.
II. Economic goals of the United States
A. Economic growth
B. Full employment of all
economic resources
C. Price stability (low
inflation)
D. Positive balance of payments
(international flow of dollars)
E. Economic freedom
F. Equitable distribution of
income
G. Economic security (if you have A
through F, you have G)
H.
Economic Report of the
President
gives the President's
view on achieving these goals.
III. The study of economics is divided into two disciplines.
|
Macroeconomics is the study of total economic activity. |
Microeconomics
is the study of |
| Macro Activity | Complementary Micro Activity |
| 1. Inflation rate | 1. A product's price |
| 2. Economic growth | 2. Pollution |
| 3. Total employment | 3. Poverty |
| 4. The business cycle | 4. A competitive market |
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