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Lecture 1 on "What is Economics"

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ECON 1000
Steven Edwards

ECON 1000 MICROECONOMICS INTRODUCTION CHAPTERS 1,2,3 Macro- dealing with aggregates, total production of nation, accumulated by the micro Micro- Behavior of the smaller universe, the players. (consumers, labour pools, entrepreneurs, industry, firms, markets -Many big issues can be said to be composed of several small issues Knowledge of economics is based on individual behavior (how you function daily) - The consumer decides what to purchase, the labour pool decides what job to take, the entrepreneur decides how many to hire from labour pool and how to integrate technology to product output - Distinguishing between needs, wants, and desires. - Food, water and shelter are physiological needs - Are wants are unlimited (WE WANT EVERYTHING) - All economics questions arise because we want more than what we can get (human nature) - The existing supply of resources are inadequate - Resources that give back (land, water, nature) - Human resource (knowledge, skilled services) - Back in the day it was all physical work (no mental labour) - Capital refers to the factors of production (used to produce desired goods) - The activity of making goods and services is called production - Because of limited ability to satisfy unlimited wants and needs resources are seen as scarce, for insufficient to satisfy through production all the goods and services that people want - We can’t produce everything- scarce resources - A mechanism is put into place to decide what to buy, It’s choice - Choices are dependents on the incentives that we face ECONOMICS- THE STUDY OF THE MANKIND IN THE ORDINARY ECON 1000 MICROECONOMICS INTRODUCTION CHAPTERS 1,2,3 BUSINESS OF LIFE Economics arises out of the scarce resources to satisfy human wants Economics is the study off the ways that humans organize themselves to make the necessary choices about how scarce resources are to be used to produce goods and services necessary to satisfy human wants and needs TWO BIG QUESTIONS TO SUMMARIZE ECONOMICS 1) How do choices end up determining what, how, and for whom the goods and service get produced? 2) When do choices made in the pursuit of self-interest also promote the social interest? (who benefits from your choice/decision) WHAT IS PRODUCED - Agriculture account for 2% of total production, manufactured goods for 20%, services are the biggest at 78% (retail, wholesale trade, health care, education) - An economists can identify costs and benefit of any one answered HOW TO PRODUCE - What is the appropriate technology to apply - Good and services are produced by using productive resources that economics call factors of production FACTORS OF PRODUCTION HAVE FOUR CATEGORIES 1) Land 2) Labour 3) Capital 4) Entrepreneurship Distinguish between capital and financial capital - capital refers to the physical tools used to produce goods and services (machinery) - Entrepreneurship refers to the human side of the relationship of labour. This component organizes land, labour and capital - the inventors that are critical to how its produced, and are able to take the risk unlike any of the other factors ECON 1000 MICROECONOMICS INTRODUCTION CHAPTERS 1,2,3 FOR WHOM TO PRODUCE - Who gets the goods and services depends on the incomes are people potentially can earn. - Land earns rent - Labour earns wages - Capital earns interest - Entrepreneurship earns profit - Can the pursuit of self-interest promote the social interest? (do we use are factors of production wisely) - Self interest: the choices that are best for yourself - Social Interest: Choices that are better for society as a whole. - SOCIAL INTEREST HAS 2 DIMENSIONS - Efficiency and Equity - There are four topics that generate discussion and illustrate tension
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