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The word economy comes from the greek word
Oikonomia
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'Oikonomia' means
Management of the household
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Father of modern economics
Adam Smith
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What did Adam Smith first wrote
'An inquiry into the wealth of Nations'
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The study of how society manages its scarce resources which have alternative uses to produce goods and services to satisfy insatiable/ unlimited wants
Economics
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Most ask questions when it comes to economics
- 1. How people decide what to buy
- 2. How much to work, save and spend
- 3.How firms decide how much to produce, how many workers to hire
- 4. How society decides how to divide its resources between national defense, consumer goods, protecting the environment and other needs
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2 main branches of Economics
- 1. Microeconomics
- 2. Macroeconomics
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Study of the behavior of individual units in the economy.
Firms, Industry and Market
Microeconomics
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Study of economy as a whole
Investment, unemployment, inflation, & economic growth
Macroeconomics
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Concerned with what is?
It is based on facts and theories
It deals with cause and effect of relationship of economic phenomena
Ex. Price rises when there is a shortage and prices falls when there is a surplus
Positive Economics
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Concerned with what ought to be?
It is based on value judgement or opinion
It cannot be tested
Ex. Price of rice should be higher to help farmers earn more
Price must lower to improve the standard of living
Normative Economics
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Refers to a tool used by economist to explain economic phenomena. Uses assumption to simplify reality
Model
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This is an explaination of why things are as they are
Theory
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This is a conjecture/ proposition that is subjected to emperical verification
Hypothesis
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This is experience when firms are able to reduce the per unit cost of producing the output at lowest possible cost.
Economic Efficiency
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Refers to tangible and intangible things that can satisfy human wants
Ex. Food, shelter, services
Goods
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Types of goods
- 1. Free goods
- 2. Economic goods
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Scarce / limited and have price
Economic goods
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Can be acquired at zero price
Free goods
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Products that are ready for final consumption
Final goods / finished products
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Are used for further production of a good into a finished product
Intermediate goods/ semi-finished products
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Economics is a social science concerned with
Individual behavior
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They help explain economic behavior and provide policy implications
- 1. Pschology
- 2. Sociology
- 3. Political Science. Etc
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Economics involve the collection of empirical:
- 1. Observation/ data
- 2. Verifying and testing data using statistical tool and techniques
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Can analyze the impact or effect of a certain economic phenomenon on the business and economy as a whole
Businessmen
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Apply economic theories in their day to day activities and making choices and decisions
Ordinary people
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Studying economics can guide them in policy formulation and evaluation especially on policies related to trade, taxation, poverty, prices, interest, rate, foreign debt and economic concerns
Government / Policymakers
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