Applied econ

• Trade-off


  When a choice is made, you can no longer go on all other options
• Trade-offs


  Could result in either the satisfaction of needs or failure to meet them
• Opportunity cost


  The cost of giving up an alternative when making a choice
• Opportunity cost encourages us to be aware of the things that we give up as well as the consequences of our choices in order to make a good decision when we purchase or avail of a certain product or service
• Economics is a social science that studies the production, distribution, and consumption of goods and services
• Economics


  Concerned with the effective management of scarce resources to satisfy unlimited human wants and needs
• Economics


  • Originally focused on studying the interdependence among people, and how society is defined by the movement of goods and services in relation to the needs and wants of people
  • Modern economics focuses on how information and technology define decision making and organization in an economy
• Scarcity


  Fundamental concept in Economics, reconciling the reality of scarcity with unlimited wants and needs is central to the study of Economics
• Economic resources and factors of production

  • Land
  • Labor
  • Capital
  • Entrepreneurship
• Economic systems


  Characterized by organized institutions that manage and allocate resources for production
• Types of economic systems

  • Market economic system
  • Command economic system
  • Mixed economic system
• Rationality


  Concept used by economists to analyze and predict the behavior of people given changes and developments in the economy
• Decision-making is a vital aspect of Economics
• Economics refers to the effective management of scarce resources to satisfy unlimited human wants and needs
• Economics is a social science that studies the means by which individuals, groups, and societies produce, distribute, and consume products and services
• Adam Smith wrote the book An Inquiry into the Nature and Causes of the Wealth of Nations and started the idea of Economics as a separate discipline from Philosophy


  1776
• Adam Smith's idea of Economics

  Society is based on interdependence among people, with the movement of goods and services in relation to the needs and wants of people
• As modern economy is primarily defined by knowledge and technology, the conventional definition of Economics which focuses on matching scarcity and wants is challenged by the need for better organization to effectively address scarcity and human wants
• Economists recognize the influence of incentives, choices, and rules in managing an economy, which requires the free flow of information for effective decision making and organization
• Scarcity


  The limitation of resources, particularly economic resources such as land, labor, capital, and entrepreneurship
• Needs


  Things that are desired which are essential for human survival
• Wants


  Things that are desired but are not essential for survival
• Human wants and needs are unlimited, as we fulfill or meet one need or want, we immediately look to meet another need or want
• Economic resources and factors of production

  • Land
  • Labor
  • Capital
  • Entrepreneurship
• Land


  All natural resources that exist without man's intervention, such as air, water, forests, vegetation, and minerals
• Labor


  Human inputs such as manpower skills that are used in transforming resources into different products that meet our needs
• Capital


  Man-made factor of production used to create another product, such as machinery and equipment used in manufacturing companies
• Entrepreneurship


  The factor of production that integrates land, labor, and capital to create new products
• The four factors of production are considered to be scarce or limited, as their availability is defined by our unlimited needs and wants
• The three basic economic questions

  • What to produce?
  • How to produce?
  • For whom to produce?
• Market economic system


  All economic resources are owned by private entities, producing goods that yield high profits, at maximum efficiency with minimum costs, and distributing the goods to those who can afford to buy them
• Command economic system


  All resources are owned by the government, producing more public goods, employing all possible laborers and using available machinery and equipment, and producing for the public
• Mixed economic system


  Economic resources are owned by both the government and private entities, with the three economic questions answered by both in consideration of their mutual benefit
• Rationality


  The assumption that individuals are consistent and logical in their decision-making, and that they seek an outcome that is most beneficial to them
• Opportunity cost


  The cost of giving up an alternative by selecting the best choice
• Trade-off


  The consequence of making a choice, sacrificing all other alternative choices
• Applied economics is the application of economic theory and econometrics in real-world situations, concerned with using economic theories and models, as well as related principles and concepts, to understand contemporary socioeconomic issues
• Applied economics is closely tied to public policy and governance, as decision-making often utilizes economic tools and methods
• The primary concern of applied economics is to address problems and bring about economic development
• Economics


  The effective management of scarce resources to satisfy unlimited human wants and needs