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Introduction to Economics - Basic Concepts of Economics & Divisions of Economics



Basic Concepts of  Economics


Definition of Economics

•    Study of how societies use scarce resources to produce valuable commodities and distribute them among different people with various needs
•    Study of how individuals within a society generally make choices that involve the use of scarce resources from among alternative wants that need to be satisfied
•    Scientific study of the choices made by individuals and societies in regard to the alternative uses of scarce resources which are employed to satisfy wants and needs


Scarcity

 •    The limited nature of society’s resource
•    An economic condition wherein there is no enough resources to satisfy all the demands of the people

 Image result for scarcityImage result for scarcity

Opportunity Costs

•    The value of the good or service foregone
•    The value of the next best choice that you give up when you make an economic/rational decision


There Ain't No Such Thing As A Free Lunch - TANSTAAFL
Image result for TANSTAAFL 


Importance of Studying Economics 

•    Economics affects daily life
•    Economics helps render more informed decisions
•    Makes us more effective citizens



Divisions of Economics

Microeconomics

•    Study of how households and firms make decisions and how they interact in specific markets
•    Adam Smith - most popular personality in microeconomics; author of The Wealth of Nations; postulated the concept of the “invisible hand”

The Invisible Hand concept - asserts that as individuals selfishly pursue their personal interests they unintentionally bring about effects that are beneficial for the whole community

 Macroeconomics

 •    Study of economy-wide phenomena
•    Examines the overall level of a nation’s output, employment and prices
•    John Maynard Keynes - pioneered the study of macroeconomics as a subfield of economics in 1936
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