Kinh tế học - Element of economics

ELEMENT OF ECONOMICSGOHOHO EMMANUEL SENAIntroducing EconomicsLearning ObjectivesAt the end of this lecture, students should be able toDefine EconomicsIdentify the Sources of Economics ProblemsDefine Opportunity CostDefine Production and possibility FrontierDifferentiate between Positive and normative EconomicsDifferentiate between Micro and Macro EconomicsTo know the different types of Economic SystemsIntroducing EconomicsWhat is economics?According to McConnel and Brue Economics is defined as: The Social Science concerned with the efficient use of limited or scarce resources (and the various uses which compete for these resources) to achieve maximum satisfaction of human material wants.It is a science of making choiceWHAT DO ECONOMISTS STUDY?Economic problemsproduction and consumptionScarcity: the central economic problemdefining scarcityuse of resources (factors of production)labourland and raw materialscapitaldemand and supplyimportance of reconciling demand and supplyactual and potential demand and supplyWHAT DO ECONOMISTS STUDY?Macroeconomic issuesgrowthunemploymentinflationbalance of payments problemscyclical fluctuationsWHAT DO ECONOMISTS STUDY?Microeconomic issueschoices: what, how and for whomthe concept of opportunity costrational economic decision makingmarginal costs and marginal benefitsMC > MB  do moreMC Sg)Pg ­Sg ­Dg¯until Dg = SgThe price mechanism:the effect of a rise in demandGoods MarketDg ­shortage(Dg > Sg)Pg ­Sg ­Dg¯until Dg = SgFactor MarketSg ­Sf ­Df¯until Df = Sf­Dfshortage(Df > Sf)Pf ­The price mechanism:the effect of a rise in demandECONOMIC SYSTEMSThe free-market economydemand and supply decisionsthe price mechanism:shortages and surplusesequilibrium priceresponse to changes in demand and supplythe interdependence of marketsGoods MarketDg ­shortage(Dg > Sg)Pg ­Sg ­Dg¯until Dg = SgFactor MarketSg ­­shortage(Df > Sf)Pf Sf ­Df¯until Df = SfDf­The price mechanism:the effect of a rise in demandECONOMIC SYSTEMSAdvantages of a free-market economytransmits information between buyers and sellersno need for costly bureaucracyincentives to be efficientcompetitive markets responsive to consumersECONOMIC SYSTEMSProblems of a free-market economycompetition may be limited: problem of market powerinequalitythe environment and other social goals may be ignored56 of 40Mixed Systems,Markets, and GovernmentsSince markets are not perfect, governments intervene and often play a major role in the economy. Some of the goals of government are to: Minimize market inefficiencies Provide public goods Redistribute income Stabilize the macroeconomy:Promote low levels of unemploymentPromote low levels of inflation akpe na mi!