Notes for a macroeconomics course.

CHAPTER 1.

THE NATURE OF ECONOMICS

I. Definition

economic science is a social science concerned with the efficient

utilization of strange resources, in order to maxim eachy satisfy societys unlimited wants.

II. Functions of Economics

The production, distribution, and expending of goods and services.

III. Benefits of Economics

A. Most historical, social, and economic changes have economic backgrounds.

B. Governments are more and more relying on economists for decision-making.

C. Economics teaches us that in the real valet de chambre every decision we make involves opportunity costs or tradeoffs.

D. Economics helps the citizenry understand how the market, the government, and world politics function.

E. Economics helps the voters make wise public choices at elections.

F. Economics helps plenty in their personal and business decision-making.

IV. Types of Economics

A. Macroeconomics

A study of economic aggregates and policies on the national level, including income, output, the price level, and trade.

B. Microeconomics

A study of how consumers, households, firms, markets, and industries make their economic decisions.

V. tenableness Assumption

Rational people will not make decisions that will begin them to be worse off than before.

VI. The Invisible Hand Concept

The thought process that while the participants of the market pursue their self interest, they automatically put up the public welfare. Thus, government must play only a limited role.

VII. The Methodology of Economics

A.



Theories

General statements about cause and effect in economic life.

B. Models

Formal statements of theories showing the relationship between two or more variables.

C. Inductive Logic

Moving from facts to principles (Facts-Theories-Policies)

D. Deductive Logic

Moving from a hypothesis to its proof.

E. ceteris paribus - all other things being equal assumption

VIII. Approaches to Economics

A. Descriptive/ Positive Economics

Describes what exists and how it works.

B. prescriptive/ Applied Economics

Analyzes the outcomes of economic behavior, makes value judgments, and suggests...

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