1. Chapter 2 : Economic concepts Prepared by : Dr.Hassan Sweillam

2. LEVELS OF ECONOMIC STUDIES AND ANALYSIS
Macroeconomics
Macro Economics deal with the whole economy, the aggregate values and variables at the national level. It studies the performance of the national economies and the policies that governments use to improve that performance.
Example of the macro-economic issues are the level of gross domestic product (GDP), the inflation rate, the percentage of unemployment, …etc.

3. LEVELS OF ECONOMIC STUDIES AND ANALYSIS
Macroeconomics
Also the government policies such,
Fiscal Policy: Taxes and public Govt. Expenditure
Monetary Policy: Savings and Investment
Foreign Trade: Imports and exports, Exchange rate, trade policies are another example of macro-economic tools affecting the performance of the economy.

4. LEVELS OF ECONOMIC STUDIES AND ANALYSIS
Microeconomics
Is the study of :
-Individual choices and behavior concerning consumers and producers.
-The behavior of an individual (consumers) to maximize satisfaction and
-The behavior of firms (producers) to maximize profits and minimize losses are considered micro-economic studies.

5. LEVELS OF ECONOMIC STUDIES AND ANALYSIS
What to Produce? (Micro)
How to Produce? (Micro)
How much to produce? (Micro)
For Whom to Produce? (Micro)
Are Resources Used optimally? (Micro)
Are Resources fully employed? (Macro)
Is the economy Growing? (Macro)
In what phase of business cycle is the economy? (Macro)

6. TYPES OF ECONOMIC STUDIES AND ANALYSIS
a) Positive Economics:
Positive Economics describes facts that can be calculated or tested. As for the relationship between the variables, it is describes the study.
Accordingly, when taxes or goods increase, this is a positive statement that can be tested. It is also called ‘factual economics’.

7. TYPES OF ECONOMIC STUDIES AND ANALYSIS
b) Normative Economics:
Normative Economics involves points of views and it cannot be tested nor measures, and then it is impossible to reach an agreement about it. The normative economics provides policies and solutions; it is a ‘prespective study’
Example: it is fair or unfair to levy (charge) taxes on goods?

8. Wealth and Income
Wealth – is the values of all assets ownership in a given time , it is a stock.
Wealth could be physical wealth such as equipment , buildings , factories , land while human wealth is the skills and knowledge of people.
Income-Is the return generated from wealth, it is a flow calculated during a certain period of time ( day, week, month, year).

9. Wealth and Income , cont. There are two types of Income:
1- Earned income-
That Is the return generated of work and efforts done , it is generated from human wealth.
2- Unearned income-
That Is the return generated from physical wealth ( Land , building , capital ).

10. Nominal and real Income
Nominal income-Is the numbers of pounds or dollars the one earns per unit of time; $ 1000
Real income-Is the purchasing power of Nominal income , i.e. the quantity of goods and services that can be bought by the Nominal income.
The increase in the level of prices reduces the real income .

11. Types of Goods
The Free goods -Are the goods that are available to everyone without efforts , goods available without using scarce resources or doing any efforts e.g. air , sea water , sand in desert.
The Economic goods -Are all goods and services that produced by using scarce resources , by doing an efforts and then they are charged by a cost and accordingly not available to everybody like free goods.

12. Types of Goods
Consumer goods - Are goods that give direct satisfaction to the consumer , or final products that are purchased directly by the consumer such as foods , clothes.
Producer goods (Capital Goods)-Are goods that give indirect satisfaction to the consumer as they are used to produce other goods and hence they represent a source of income such as machines , tools , equipment , and raw materials.

13. Consumer and Producer Goods ,cont.
The same good could be Consumer or Producer good according to the kind of use of that good.
e.g. The car if used as private car , so it is classified as consumer Good , and if it used as taxi or for transportation in a factory , so in this case it is considered as producer good because it has been used as a source of income , and not as source of direct satisfaction.

14. Durable and non Durable Goods
Durable good : It is the good that can be used for several times (more than once) it is good with repeated use like cars , TV”s , clothes.
Non Durable good : It is the good that can be used for once and can never be used again like food (as consumer good) or raw material (as producer good ) , they call this type goods for single use.

15. Substitute and complementary Goods
Substitute goods : Are the goods that can satisfy almost the same needs , they are called competitive goods such as ( tea and coffee , meat and chickens , Pepsi and seven up )
Complementary goods : Are those goods that complete each others to get the satisfaction , which means that consumer cannot take the satisfaction from one good without taking the other one such as ( Tea and sugar , Printers and ink cartridges, Computer hardware software, Car and fuel ) )

16. Private , Public and Merit Goods
Private goods : Are the goods (or services ) produced by private sector for the purpose of profit.
Public goods : Are the goods (or services ) provided by the government. It is mainly the public utilities such as roads , streets , bridges , electricity , safe water , sanitation Police and defense as ( public services).

17. Private , Public and Merit Goods , cont.
Public goods : These types of goods and services are called “infrastructure” or the social capital of the society since every one benefit from them, even they do not pay for them directly , thus no private sector would wish to produce them.
Merit goods : Are the essential social services provided by the government , and can be also offered by private sector such as education and health care.

18. Standard of Living and level of Welfare
Standard of Living -Is based on the level of income , the ownership of people from different assets and durable consumer goods.
level of Welfare -Is based on the degree of entertainment and satisfaction that people get from the use of their ownership and the spending of their income.

19. Decision Making Process
5 Stage Model of Decision Making Process
Define the problem
Determine the objective
Identify possible solutions
Select the best possible solution
Implement the decision

20. Globalization
Globalization is the free movement of goods, services and people across the world. Globalization can be thought of to be the result of the opening up of the global economy and the increase in trade between nations.
Globalization is grounded in the theory of comparative advantage which states that countries that are good at producing a particular good are better off exporting it to countries that are less efficient at producing that good. 

21. Globalization ,cont.
Globalization also means that countries of the world subscribe to the rules and procedures of the WTO or the World Trade Organization that oversees the terms and conditions of trade between countries. There are other world bodies like the UN and several arbitration bodies where countries agree in principle to observe the policies of free trade policies when they open up their economies.

22. Review questions True or False Questions
1- Macro Economics deal with the whole economy, the aggregate values and variables at the national level.
Answer: True
2- Example of the micro-economic issues are the level of gross domestic product (GDP), the inflation rate, the percentage of unemployment.
Answer: False

23. Review questions True or False Questions
3- Positive Economics describes facts that can be calculated or tested.
Answer: True
4- Income is the values of all assets ownership in a given time , it is a stock.
Answer: False

24. Review questions Multiple Choice Questions
1- _________ That Is the return generated of work and efforts done , it is generated from human wealth.
A- Wealth
B- Unearned Income
C- Earned Income
D- Real income
Answer: C

25. Review questions
2- ____________ are all goods and services that produced by using scarce resources.
A- Free goods
B- Economic goods
C- Public goods.
D- Resources
Answer: B

26. Review questions
3- ________ It is the good that can be used for several times (more than once).
A- Economic good
B- Non Durable good
C- Private good
D- Durable good
Answer: D

27. Review questions Brief explain Questions
1- Briefly explain the Consumer and producer goods?
2- Briefly explain the Substitute and Complementary goods ?
3- Briefly explain the stages of Decision Making Process ?
Brief explain Questions