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Introduction To Economics

Economics is the social science that examines how individuals and societies allocate scarce resources to meet unlimited wants. It is divided into microeconomics, which focuses on individual units like households and firms, and macroeconomics, which looks at the overall economy and aggregate variables. Key principles include trade-offs and opportunity cost, highlighting the consequences of choices made due to scarcity.

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31 views1 page

Introduction To Economics

Economics is the social science that examines how individuals and societies allocate scarce resources to meet unlimited wants. It is divided into microeconomics, which focuses on individual units like households and firms, and macroeconomics, which looks at the overall economy and aggregate variables. Key principles include trade-offs and opportunity cost, highlighting the consequences of choices made due to scarcity.

Uploaded by

garethyou8
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Introduction to Economics

1.1 Definition of Economics


Economics is the social science that studies how individuals, businesses, governments, and
societies make choices to allocate scarce resources to satisfy their unlimited wants and
needs. Scarcity is the fundamental problem of economics, meaning that the available
resources are limited compared to the infinite desires of people.

1.2 Branches of Economics


1. Microeconomics: Focuses on the behavior of individual economic units, such as
households and firms. It examines how these units make decisions regarding the
allocation of resources and the prices of goods and services. Key topics include
supply and demand, consumer behavior, and firm production and cost.
2. Macroeconomics: Deals with the overall performance and behavior of the entire
economy. It studies aggregate economic variables like gross domestic product
(GDP), inflation, unemployment, and economic growth. Macroeconomists analyze
how government policies (fiscal and monetary) affect these variables.

1.3 Basic Economic Principles


3. Trade - offs: Due to scarcity, making a choice means giving up other alternatives.
For example, a government that spends more on defense may have less money to
allocate to education.
4. Opportunity Cost: The value of the next - best alternative that is forgone when
making a choice. If a student decides to spend three hours studying for an
economics exam instead of working part - time and earning 30, the opportunity cost
of studying is 30.

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