Basic Economic Concepts Lesson 1 (Part 2)

Oikonomia

Greek word which means management of the household

a social science

human person as the principal figure of interest

a science

systematic body of knowledge utilizing both deduction and induction

Application

formal business competition to analysis of interpersonal relationships within a family

Economic Theory

-abstract models used as representations of reality

-part of economics where simple models are used to describe economic phenomena (simple models like: graphs, flowcharts or sets of equations)

Rationality

-is one distinct assumption about decision makers

-the assumption of it is to imposes minimum standards for economic behavior

Exogenous Preferences

these are taken as given and is not part of economic analysis

Partial Equilibrium

this results when an optimal choice is made by an individual, an outcome results and this constitutes a equilibrium for the individual.

General Equilibrium

is where all agents (consumers and firms) are simultaneously in equilibrium

Empirical Economics

the task of this is to confront testable hypotheses with real world data

Statistics and Econometrics

are quantitative methods used as tools to test economic theories

Statistics

analyzes data trends

Descriptive Statistics

branch of statistics that deals with the summary and analysis of real world data

Inferential Statistics

this branch of statistics deals with the scientific way of making inferences regarding the key parameters of a model based on sampling from a population

Econometrics

branch of economics that deals with the creation of empirical models of economic behavior, usually in the form of equations called regression equations.

Microeconomics

looks at the economic behavior of individuals and firms; individual markets are examined; e.g. labor, employment (subfields of economics like labor economics, environmental economics, health economics, etc).

Macroeconomics

studies the economy as a whole; looks at all markets and uses aggregate variables ; e.g. price levels, total exports and imports, money supply, etc,