Introduction to Economics PDF

Introduction 1.)The meaning of Economics Economics can be define as “the study of allocating scarce resources among unlimited and alternative human wants [and needs]”. There are 4 italicized words in this definitions that deserves a deeper consideration o Allocating = benefi...

Introduction 1.)The meaning of Economics Economics can be define as “the study of allocating scarce resources among unlimited and alternative human wants [and needs]”. There are 4 italicized words in this definitions that deserves a deeper consideration o Allocating = benefits and costs; likewise suggest a consideration for the distribution of output o Scarce = the use of resources implies less resources available for other output o Alternative = the production of an output involves a choice o Unlimited = human wants(and needs) are growing; changing over time The definition of Economics just provided highlights the 4 main concerns [phrased as questions]:  What [output] to produce?  How to produce [that output]?  For whom to produce [that output] ?  The need to increase production [human needs are ever increasing]? Since there is scarcity of resources and outputs, there is a need to maximizing economic efficiencies; the different types of economic efficiencies are as follows: Allocation efficiencies = for the consumer, refers to the allocation of output such that total utility gets to be maximized considering consumer’s income and output prices; in the case of the firm, refers to the allocation of inputs such that total output is at the highest possible level considering total costs and input prices Production efficiencies = refers to the output level which will result in least total costs per unit of output (that is minimum average total costs) produced. Take note that optimal productive efficiencies will necessarily result in optimizing allocation efficiencies Dynamic efficiencies = involves the use of productive technologies that will result in least average total costs per unit of output Market efficiencies = involves the maximization of total benefits of all market agents (both consumers and producers); using metrics, this can be indicated by the use of net market surplus (that is the sum of both consumer and producer surpluses) or no deadweight losses in the market