Introduction to Economics - Essentials

Introduction to Economics

• The book is titled "Essential Foundations of Economics" Ninth Edition, by Bade and Parkin.
• Economics is about the choices individuals, businesses, and governments make in the face of scarcity.
• Economists try to understand and predict the effects of economic forces, using the scientific method.

Scarcity

• Economic questions arise because human wants exceed available resources.
• Scarcity necessitates making choices among alternatives.
• Choices depend on the incentives present.

Economics Defined

• Economics is a social science studying choices by individuals, businesses, and governments.
• These choices are influenced by scarcity and incentives.
• Choices are coordinated through various arrangements.

Branches of Economics

• Microeconomics studies individual and business choices, their interactions, and government influence.
• Macroeconomics examines the aggregate effects on a national or global economy.

Key Economic Questions

• How do choices determine what, how, and for whom goods and services are produced?

• When do self-interest choices also promote social interest?

• What, How, and For Whom? This focuses on what goods are created, how they are produced, and who receives them.

• Can Pursuit of Self-Interest Be in Social Interest? This examines whether individual choices benefit society as a whole.

Illustrative Economic Topics

• Globalization: The expansion of international trade; examples include Nike producing shoes in other countries, or Toyota making cars in the US,
• The Information Revolution: This focuses on the development of computer chips and programs.
• Climate Change: Examines the choices made about producing and using energy and whether those choices benefit society.
• Government Budget Deficit and Debt: The analysis of U.S government deficit and debt since 2000. The debt has risen substantially and there is concern about paying it back.
• Retirement and Health Care Benefits: How increasing costs of benefits for older Americans might affect future budgets.
• Student Loans, Disney vs Netflix, regulating tomatoes from Mexico, or doing charity work: These are examples of everyday decisions that can be evaluated using an economic lens.

The Economic Way of Thinking

• Choice is a tradeoff: Every choice involves giving up something else.
• Cost is what you give up: Opportunity cost is the value of the next best alternative.
• Benefit is what you gain: Benefit is measured by the value of what is gained.
• Rational choices are made by comparing costs and benefits: People make sensible decisions.
• Most choices are "how much" choices at the margin: Decisions involve adjustments rather than complete shifts.
• Choices respond to incentives: Rewards or penalties influence behavior.
• Marginal Cost: The opportunity cost of a one-unit increase in activity.
• Marginal Benefit: What is gained by taking one more unit of something. A rational choice occurs when marginal benefit exceeds or equals marginal cost.

Economics as a Social Science

• Economists use the scientific method to understand and predict economic forces.
• Economists ask a question or examine a puzzle.
• Economists use models to explain facts.
• Economists check model predictions against reality:
  • Natural experiments are situations in real life where a single variable changes while other conditions remain consistent.
  • Statistical investigations look for correlation or correlation among economic variables.
  • Economic experiments put people in decision-making simulations to observe their behavior

Economics as a Policy Tool

• Economic analysis can help evaluate policy options.
• Economics analyzes positive questions and normative questions (what 'ought' to be).
• Economics provides tools, but can only help with implementing positive goals.

Economics as a Career

• Economics majors can work as economists, financial analysts, and budget analysts.
• Economics majors can be successful in many fields, such as business, law, and public health.
• Jobs are expected to grow for economists and other related positions.

Conclusion

• Economics is a practical and applicable discipline
• It helps us make informed decisions in a variety of areas of life.

This quiz covers key concepts from the book 'Essential Foundations of Economics'. It explores the definition of economics, the impact of scarcity, and the key branches such as microeconomics and macroeconomics. Test your understanding of economic principles and choices made by individuals and governments.