[Presentation] the Scope and Method of Economics

7/30/2019 [Presentation] the Scope and Method of Economics

1/24

Class : AY

Yoss Naga Saputra / 125110002Sunarto Dharmawan / 125110003Fenny Fong / 125110007Gracia Amanda / 125110009


2/24

ECONOMICS?

Social

Science

Studies ofChoices

The Use ofScarce

Resources


3/24

Economics is the social science thatstudies the choices that individuals,

businesses, governments, and entiresocieties make as they cope withscarcity and the incentives that

influence and reconcile thosechoices.


4/24

The questions economics asks andattempts to answer fall into twocategories.

1. Positive economics economic realitythat can be supported or rejected byreference to the facts. They might beright or wrong. It is used to understandthe behavior and operation of economicsystems.


5/24

Positive

Economics

Descriptive

economics Economic

theory Empirical

economics


6/24

2. Normative economics reflectsopinions and values, judging whetherthe outcomes are good or bad. Itdescribes what exists and how it works.


7/24

Simply speaking, positive economics dealwith what is while normative economics isconcerned with what should be.

Economics Not so normative as arts nor sopositive as science


8/24

Scope of Economics


9/24

Microeconomics studies behaviors ofindividual decision makers in a particularmarket and their interrelationships.

Microeconomics examines the factors ofindividual economic choices and how thosechoices are coordinated by markets.Ex. : How price and quantity supplied for acertain product interact, determine each otherand finally come to equilibrium.


10/24

Macroeconomics is the overall behavior andperformance of an entire economy. Whathappens in an economy is the outcome of

millions of individual decisions, andmacroeconomics puts all the small pieces thatare subjects of microeconomics together tofocus on the big picture, as at a national or aglobal level.


11/24

Examples of Microeconomic and Macroeconomic ConcernsProduction Prices Income Employment

Micro-economics

Output inIndividual

IndustriesandBusinesses

Price ofIndividual

Goods andServices

Distributionof Income

and Wealth

Employment byIndividual

Businesses &Industries

Macro-economics

NationalProduction / Output

AggregatePrice Level

NationalIncome

Employment andUnemploymentin the Economy


12/24

Rational Self-Interest

Opportunity CostMarginal Analysis & Sunk CostEfficient Market


13/24

Rational self-interest means that in acondition, individuals try to minimizethe expected cost for a benefit or

maximize the expected benefit with acost.In economics, those rational choices

realized by tradeoffs.


14/24

Tradeoff is an exchange giving up onething to get something else.This is an economic way of thinking because we choose among the availablealternatives.

What How For Whom


15/24

The highest valued alternative of theactivity that we give up to get the otherthing.These costs are noncash or implicit andsometimes cant be measured by money. Opportunity cost is subjective . Only thechooser can determine the mostattractive alternative for itself from itsspecial point of view.


16/24

Marginal cost is the cost of an increase in anactivity (additional cost).

The benefit that arises from an increase in theactivity is called marginal benefit.By evaluating marginal benefits and marginalcosts and choosing only the action that bring greater benefit than cost, we use our scarceresources in the way that makes us as well offas possible.


17/24

Decreasing Marginal Benefit


18/24

In marginal analysis, one of the concepts thatcannot be missed out is sunk cost.Sunk costs are costs that cannot be avoidedfor any nonzero units of products and that donot change regardless of the quantity ofproduction.

As opposed to sunk cost, marginal cost is thecost that is relevant to the quantity producedand that do not occur with a zero production.


19/24

Efficient market implies unequal costsor profits associated with alternativesare eliminated as people respond toincentives (e.g. profit, risk, time savings,price, money, etc.)Profit opportunities are rare because, atany one time, there are many peoplesearching for them.


20/24

EconomicPolicy

Efficiency

Equity

Stability

Grow


21/24

Variable A measurethat can

change from

time to time.

Model Formal

statement of

a theory.Models aredescriptions

of the

relationshipbetween twoor more

variables.

Theory

Generalstatementof cause

and effect,

action andreaction.


22/24

Part of the process of abstraction used to focusonly on key point.

Ceteris Paribus

Falsely assuming a first event caused secondevent.

Post Hoc Fallacy

What is good for one is not necessarily good forall.

Fallacy of Composition


23/24

Parkin, Michael and friends. 2007. Economics: 5th Edition . Australia. Publisher : Pearson EducationAustralia.Case, Karl; Fair, Ray. 2002. Principles of Economics:6th Edition . Publisher : Prentice Hall BusinessPublishing. Purpose And Scope Of Economics . Cited: August 29,2011. Available from:http://www.oldandsold.com/articles10/economics-1.shtmlScope of Economics . Last update: 2011. Cited:August 29, 2011. Available from:http://economicsconcepts.com/scope_of_economics.

htm


24/24

Documents

[Presentation] the Scope and Method of Economics