Economics Extension

• Economics


  The study of how society manages its scarce resources
• Etymology of economics


  From the word "oikonomia" or "one who manages household"
• Law of Scarcity


  Resources are limited for the unlimited wants of man
• Branches of Economics


  • Microeconomics
  • Macroeconomics
• Microeconomics


  Focused on economic behavior of much smaller units (individuals, etc.)
• Macroeconomics


  Focuses on economic behavior of much larger units (corporations, geography, etc.)
• Scientific Methods of Economics

  • Data Gathering
  • Economic Analysis
  • Economic Conclusion
• Economics as Science


  • Social Science - deals with uncontrolled variables, concerned with efficient and effective allocation of resources
  • Applied Science - application of economic principles and theories in real-life
• Positive Economics


  Positive statements or descriptive, claims that attempt to describe the world as it is
• Normative Economics


  Normative statements or prescriptive, claims that attempts to prescribe how the world should be
• The Three Basic Economic Questions

  • What to produce?
  • How to produce?
  • Whom to produce for?
• Efficiency


  The property of society getting the most it can from scarce resources, "The economic pie's size"
• Equity


  The property of distributing economic prosperity uniformly among members of society, "How the pie is divided into individual slices"
• Opportunity Cost


  Whatever must be given-up to obtain some item
• Rational People


  People who systematically and purposefully do the best they can to achieve their objectives, given the available opportunities
• Marginal Change


  Small incremental adjustments to an existing plan of action
• Incentive


  Something that induces a person to act whether a prospect of a punishment or reward
• Trade


  Allows each person to specialize in the activities one do best; whether it is farming, sewing or home building, and buy a greater variety of goods and services at lower cost
• Market


  A place where buyers and seller meet
• Market Economy


  An economy that allocates resources through the decentralized decisions of many firms and households as they interact for goods and services
• Categories of an Economic System

  • Traditional Economy
  • Command Economy
  • Market Economy
  • Mixed Economy
• Market Failure


  A situation in which a market left on its own fails to allocate resources efficiently
• Market Power


  The ability of a single economic actor (individual/s, entity/ies) to have a substantial influence on market prices
• Externality


  The impact of one person's actions on the well-being of other player in the market
• Merit Good


  Products, items, and/or goods imposed to people because the government thinks it's good for the people
• Productivity


  The quantity of goods and services produced from each unit of labor input
• Gross Domestic Product (GDP)


  Location-based measure of economic activity
• Gross National Product (GNP)


  Citizenship-based measure of economic activity
• Inflation


  An increase in the overall level of prices in the economy
• Phillips Curve


  The graph showing the inverse relationship between inflation and unemployment
• Purchasing Power of Peso (PPP)


  The value of the peso
• 10 Principles of Economics (Simplified)

  • People face trade-offs
  • The cost of something is what you give up
  • Rational people think at the margin
  • People respond to incentives
  • Trade can make everyone better off
  • Markets are usually a good way to organize economic activity
  • Governments can sometimes improve economic outcomes
  • The standard of living depends on a country's production
  • Prices rise when the government prints too much money
  • 10. Society faces a short-run trade-off between inflation and unemployment
• Hidden Rules of Economic Class

  • Poverty
  • Middle Class
  • Wealthy
• Differences between Poverty, Middle Class, and Wealthy


  • Possessions
  • Money
  • Personality
  • Social Emphasis
  • Food
  • Clothing
  • Time
  • Education
  • Destiny
  • Language
  • Family Structure
  • Worldview
  • Love
  • Driving Forces
  • Humor