Lecture 2
Lecture 2
Lecture 2
Economics
Chapter 1
WHY STUDY ECONOMICS?
• As a voter, you will make decisions on issues that cannot be understood until
you have mastered the rudiments of this subject.
• Without studying economics, you cannot be fully informed about
international trade, tax policy, or the causes of recessions and high
unemployment.
• Choosing your life’s occupation is the most important economic decision you
will make.
WHY STUDY ECONOMICS?
• Your future depends not only on your own abilities but also on how national
and regional economic forces affect your wages.
• Also, your knowledge of economics can help you make wise decisions about
how to buy a home, pay for your children’s education, and set aside a nest
egg for retirement.
• Of course, studying economics will not make you a genius. But without
economics the dice of life are loaded against you.
SCARCITY AND EFFICIENCY: THE TWIN
THEMES OF ECONOMICS
• Definitions of Economics
• Over the last half-century, the study of economics has expanded to include a vast
range of topics.
• Here are some of the major subjects that are covered in this book:
• Economics explores the behavior of the financial markets, including interest rates,
exchange rates, and stock prices.
• The subject examines the reasons why some people or countries have high incomes
while others are poor.
Definitions of Economics
That goods are scarce, and that society must use its
resources efficiently.
• No society has reached a utopia of limitless
possibilities. Ours is a world of scarcity , full
of economic goods .
• A situation of scarcity is one in which goods
are limited relative to desires.
Scarcity and
• Economic efficiency requires that an
Efficiency economy produce the highest combination
of quantity and quality of goods and services
given its technology and scarce resources.
An economy is producing efficiently when no
individual’s economic welfare can be
improved unless someone else is made
worse off.
Economics is today divided into two major subfields,
microeconomics and macroeconomics.
Microeconomics
and Macroeconomics did not even exist in its modern form until 1936, when
Macroeconomics John Maynard Keynes published his revolutionary General Theory of
Employment, Interest and Money.