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Economic Foundations
Topic 1: Economic Activity
Economics: Economics studies how people, corporations, and the government make decisions to satisfy people's needs and wants.
2 Major Areas:
Macroeconomics: The study of economics about the general overview of the economy, mainly looking at growth, unemployment, and inflation.
Microeconomics: The study of looking at people and companies coming together to support the supply and demand of resources.
Economical Perspectives
Scarcity and Choice: The challenge of having unlimited wants while having limited resources.
Rational Behavior: The idea that people make choices to maximize their satisfaction while companies make choices to maximize their profits.
Marginal Analysis: Looking at the difference between the extra benefits coming from something versus the extra costs.
8 Economic Goals
Economic Growth: Growing number of goods and services compared to the number of people there are.
Full Employment: The goal of having all the people who are willing to be working are working.
Economic Efficiency: Making as much as you can from a small amount of resources, eliminating waste as much as possible.
Price Stability: Lowering the likelihood of inflation or deflation for stable prices.
Economic Freedom: People are allowed to spend money in whatever way they want, being able to make whatever they want, and being able to work wherever they want.
Equitable Distribution of Income: Desiring minimum inequality, so all people can have a good standard of living.
Economic Security: Making sure people are protected against unemployment or bankruptcies.
Balance of Trade: Having an equal balance between imports and exports so that large surpluses or deficits are minimal.
Needs vs Wants:
A need is a necessity that somebody needs to live such as water, food, shelter, or healthcare.
A want is something that someone desires for pleasure, such as traveling or getting new clothes, these can change over time due to different preferences or economic stability.
Purpose: The main purpose of economic activity is to produce goods and fulfill people's needs and wants.
Economic Decision
What: What to produce, this is based on demand from consumers and how much profit can be made off of the item.
How: What is the most efficient way of making this product, factors including time, money, and energy?
Who: Who is going to benefit from this good or service?
Economic Groups
Consumers: People who will be buying or using the good or service.
Producers: The people who make or give goods or services, businesses.
Government: The government oversees the interactions between consumers and producers and gets taxes on goods and services.
Interactions: Interactions between these groups happen with the consumer buying from the producer who makes things based on consumer demands, and the government monitoring these interactions
Methodologies:
Normative Economics: The things a government should do to reach a goal.
Policy Economics: Developing a policy to solve an economic problem.
Positive Economics: Facts describing economic phenomenanas.
Theoretical Economics: Models made based on logic and assumptions, like the Keynesian theory.
Inductive Analysis: Researching patterns to make laws or theories.
Deductive Analysis: Using theories to make specific conclusions.
Economic Systems:
Market Economy: Prices are determined by supply and demand nd, and there is minimum government intervention (USA, Singapore).
Command Economy: The government has a large control over what and how things are being made (North Korea).
Mixed EconoA mix Mix of both command and market economies, both supply and demand play a role (UK, France).
Laws
Law of Increasing Opportunity Cost: When the production of a good increases, the opportunity costs of that good for an additional unit rise.
Topic 2: The Factors of Production
Economic Resource: These resources determine how for who, and what will be made/served.
Resources Used in Production: These things impact the way things are made, for example, how much money/time is put into making a good.
Land: How much land is available to use to make this good, some things need more land than others so depending on how much land you have you can decide what to make/serve.
Labor: Labor is the amount of energy humans put into work.
Capital: Capital is how much money you have to invest into production, if you have more money you can invest in more goods to be made and you can have better resources to use.
Entrepreneurial Skills: The skills you have to use your land, labor, and capital as best as possible.
Topic 3: Making Choices
Choices: A decision that you have to make which is weighed by possible costs and benefits.
Costs: The things that you have to sacrifice to make a decision.
Benefits: The things that you get and earn from making a decision.
Opportunity Cost: The situation when pursuing something another option comes up that is relatively better, this would be the “Opportunity” that came at the cost of sacrificing the other opportunity.
Economic Foundations
Topic 1: Economic Activity
Economics: Economics studies how people, corporations, and the government make decisions to satisfy people's needs and wants.
2 Major Areas:
Macroeconomics: The study of economics about the general overview of the economy, mainly looking at growth, unemployment, and inflation.
Microeconomics: The study of looking at people and companies coming together to support the supply and demand of resources.
Economical Perspectives
Scarcity and Choice: The challenge of having unlimited wants while having limited resources.
Rational Behavior: The idea that people make choices to maximize their satisfaction while companies make choices to maximize their profits.
Marginal Analysis: Looking at the difference between the extra benefits coming from something versus the extra costs.
8 Economic Goals
Economic Growth: Growing number of goods and services compared to the number of people there are.
Full Employment: The goal of having all the people who are willing to be working are working.
Economic Efficiency: Making as much as you can from a small amount of resources, eliminating waste as much as possible.
Price Stability: Lowering the likelihood of inflation or deflation for stable prices.
Economic Freedom: People are allowed to spend money in whatever way they want, being able to make whatever they want, and being able to work wherever they want.
Equitable Distribution of Income: Desiring minimum inequality, so all people can have a good standard of living.
Economic Security: Making sure people are protected against unemployment or bankruptcies.
Balance of Trade: Having an equal balance between imports and exports so that large surpluses or deficits are minimal.
Needs vs Wants:
A need is a necessity that somebody needs to live such as water, food, shelter, or healthcare.
A want is something that someone desires for pleasure, such as traveling or getting new clothes, these can change over time due to different preferences or economic stability.
Purpose: The main purpose of economic activity is to produce goods and fulfill people's needs and wants.
Economic Decision
What: What to produce, this is based on demand from consumers and how much profit can be made off of the item.
How: What is the most efficient way of making this product, factors including time, money, and energy?
Who: Who is going to benefit from this good or service?
Economic Groups
Consumers: People who will be buying or using the good or service.
Producers: The people who make or give goods or services, businesses.
Government: The government oversees the interactions between consumers and producers and gets taxes on goods and services.
Interactions: Interactions between these groups happen with the consumer buying from the producer who makes things based on consumer demands, and the government monitoring these interactions
Methodologies:
Normative Economics: The things a government should do to reach a goal.
Policy Economics: Developing a policy to solve an economic problem.
Positive Economics: Facts describing economic phenomenanas.
Theoretical Economics: Models made based on logic and assumptions, like the Keynesian theory.
Inductive Analysis: Researching patterns to make laws or theories.
Deductive Analysis: Using theories to make specific conclusions.
Economic Systems:
Market Economy: Prices are determined by supply and demand nd, and there is minimum government intervention (USA, Singapore).
Command Economy: The government has a large control over what and how things are being made (North Korea).
Mixed EconoA mix Mix of both command and market economies, both supply and demand play a role (UK, France).
Laws
Law of Increasing Opportunity Cost: When the production of a good increases, the opportunity costs of that good for an additional unit rise.
Topic 2: The Factors of Production
Economic Resource: These resources determine how for who, and what will be made/served.
Resources Used in Production: These things impact the way things are made, for example, how much money/time is put into making a good.
Land: How much land is available to use to make this good, some things need more land than others so depending on how much land you have you can decide what to make/serve.
Labor: Labor is the amount of energy humans put into work.
Capital: Capital is how much money you have to invest into production, if you have more money you can invest in more goods to be made and you can have better resources to use.
Entrepreneurial Skills: The skills you have to use your land, labor, and capital as best as possible.
Topic 3: Making Choices
Choices: A decision that you have to make which is weighed by possible costs and benefits.
Costs: The things that you have to sacrifice to make a decision.
Benefits: The things that you get and earn from making a decision.
Opportunity Cost: The situation when pursuing something another option comes up that is relatively better, this would be the “Opportunity” that came at the cost of sacrificing the other opportunity.
