Introduction to Economic Theory - Microeconomics, Slides of Microeconomics

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Introduction

to Economic

Theory

Your best quote that reflects your

approach… “It’s one small step for

man, one giant leap for mankind.”

• NEIL ARMSTRONG

Terms to Remember

Basic Needs – man’s needs required for his survival Capital – materials used in the production of goods and services including money Economic resources – inputs used in the production of goods and services Economic system – the framework in which society decides on its economic problem Economics – a social science concerned with man’s problem of issuing scarce resources to satisfy unlimited wants Empirical validation – the use of statistical evidence to prove the validity of hypothesis Entrepreneur – organizes all other factors of production to be used in the creation of goods and services

Free enterprise system – a system in which all economic resources are privately owned. Function – depicts the relationship between two or more variables. Labor – human effort expended in production regarding basic economic problems Land- natural resource, not man-made, covering anything found on or under land, water, forests, minerals, and animals Luxury goods – goods that man can do without Macroeconomics – the branch of economics that studies the economy as a whole;

Variable – a factor that is subject to change or variation Wants – the various desires and needs of consumers that have to be satisfied through the use of goods and services. Some definitions of Economics: How prices of land, labor and capital are determined Behavior of financial markets

Distribution of income Impact on growth Examines the movements in income Looks at trade patterns among nations Examines growth in developing countries

Resources Payment Land Rent Labor Wage / Salary Capital Interest Entrepreneurship Profit

Decision Problems

1. consumption – household
2. production – business firms
3. distribution

Economic Analysis

Economic Analysis – is the process of directing economic relationships by examining economic behavior and events and determining the casual relationships among the data and activities observed. Purposes of Economic Analysis An aid in understanding how economy operates Prediction of the results of changes Basis for just policy formulation

Economic Policy

Economic Policy – consists of intervention or courses of action taken by the government or other private institutions to manipulate the results of economic activity.