1 INTRODUCTION. Copyright © 2004 South-Western/Thomson Learning Economy...... The word economy comes from a Greek word for “one who manages a household.”

1

INTRODUCTION

Copyright © 2004 South-Western/Thomson Learning

Economy. . .

. . . The word economy comes from a Greek word for “one who manages a household.”

According to Samuelson,

Economics is the study of how socities use scarce resources to produce valuable commodities and distribute among different people.


Microeconomics and Macroeconomics

• Microeconomics focuses on the individual parts of the economy.

• How households and firms make decisions and how they interact in specific markets

• Macroeconomics looks at the economy as a whole.

• Economy-wide phenomena, including inflation, unemployment, and economic growth


THE ECONOMIST AS POLICY ADVISOR

• When economists are trying to explain the world, they are scientists.

• When economists are trying to change the world, they are policy advisor.


POSITIVE VERSUS NORMATIVE ANALYSIS

• Positive statements are statements that focus on facts and cause and effect relationships. Called descriptive analysis

• Normative statements are statements about how the world should be. Called prescriptive analysis


SUBJECT MATTER OF ECONOMICS

• Economic activities

• Economic systems

• Economic policies


ECONOMIC ACTIVITIES

• Production• Consumption• Exchange

Objective of economic activities: 1.proper allocation of resources 2.efficient use of resources


ECONOMIC SYSTEMS

The economic system is composed of people and institutions, including their relationships to productive resources. Examples of contemporary economic systems include :

CAPITALIST ECONOMY

SOCIALIST ECONOMY

MIXED ECONOMY


ECONOMIC POLICY

• A policy is a deliberate plan of action to guide decisions and achieve rational outcome(s).

• Economic Policy are the actions that the government takes in economic field.

• e.g. Fiscal policy, monetary policy, trade policy, policy of setting interest rates.


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1 INTRODUCTION. Copyright © 2004 South-Western/Thomson Learning Economy...... The word economy comes from a Greek word for “one who manages a household.”