1 INTRODUCTION
Copyright © 2004 South-Western/Thomson Learning Economy The word economy comes from a Greek word for “one who manages a household.” According to Samuelson, Economics is the study of how socities use scarce resources to produce valuable commodities and distribute among different people.
Copyright © 2004 South-Western/Thomson Learning Microeconomics and Macroeconomics Microeconomics focuses on the individual parts of the economy. How households and firms make decisions and how they interact in specific markets Macroeconomics looks at the economy as a whole. Economy-wide phenomena, including inflation, unemployment, and economic growth
Copyright © 2004 South-Western/Thomson Learning THE ECONOMIST AS POLICY ADVISOR When economists are trying to explain the world, they are scientists. When economists are trying to change the world, they are policy advisor.
Copyright © 2004 South-Western/Thomson Learning POSITIVE VERSUS NORMATIVE ANALYSIS Positive statements are statements that focus on facts and cause and effect relationships. Called descriptive analysis Normative statements are statements about how the world should be. Called prescriptive analysis
Copyright © 2004 South-Western/Thomson Learning S UBJECT MATTER OF ECONOMICS Economic activities Economic systems Economic policies
Copyright © 2004 South-Western/Thomson Learning ECONOMIC ACTIVITIES Production Consumption Exchange Objective of economic activities: 1.proper allocation of resources 2.efficient use of resources
Copyright © 2004 South-Western/Thomson Learning ECONOMIC SYSTEMS The economic system is composed of people and institutions, including their relationships to productive resources. Examples of contemporary economic systems include : CAPITALIST ECONOMY SOCIALIST ECONOMY MIXED ECONOMY
Copyright © 2004 South-Western/Thomson Learning ECONOMIC POLICY A policy is a deliberate plan of action to guide decisions and achieve rational outcome(s). Economic Policy are the actions that the government takes in economic field. e.g. Fiscal policy, monetary policy, trade policy, policy of setting interest rates.
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