6355 Lecture Notes - Lecture 1: Scientific Method, Planned Economy, Opportunity Cost
20 Jun 2018
School
Department
Course
Professor
Week 1 – Basics of Economics
Basic Concepts in Economics
Scarcity vs wants
Resources are limited, but human wants are unlimited
Economics studies the choices that people make living in this world of scarcity
Economics studies anything that involves the process of meeting these wants with scarce
resources
Microeconomics
Studies individual units: households, firms, industries
Macroeconomics
Studies the economy as a whole: total output, unemployment, economic growth, inflation
Australian Exports:
Services 17.0%
Manufacturing 9.6%
Agriculture 10.2%
Mining 53.7%
Other 9.5%
Export share by destination
1. China 28%
2. Japan 12%
3. EU 9%
4. US 6%
5. Korea 6%
6. India 5%
Market Economy
Centrally planned economy: An economy in which the government decides how economic resources
will be allocated (what will be produced, how it will be produced and then distributed, price etc.)
Market Economy: An economy in which the decisions of households and firms interacting in markets
determine the allocation of economic resources
Mixed Economy: An economy in which most economic decisions results from the interactions of
buyers and sellers in markets, but in which the government plays a significant role in the allocation
of resources
Price determines how resources are allocated
You would not find a pure market economy
OECD
Economists apply scientific method:
Devise theories
Gather data
Test the theories against the data
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Resources are limited, but human wants are unlimited. Economics studies the choices that people make living in this world of scarcity. Economics studies anything that involves the process of meeting these wants with scarce resources. Studies the economy as a whole: total output, unemployment, economic growth, inflation. Centrally planned economy: an economy in which the government decides how economic resources will be allocated (what will be produced, how it will be produced and then distributed, price etc. ) Market economy: an economy in which the decisions of households and firms interacting in markets determine the allocation of economic resources. Mixed economy: an economy in which most economic decisions results from the interactions of buyers and sellers in markets, but in which the government plays a significant role in the allocation of resources. You would not find a pure market economy. Assumptions help us to simplify complex situations, focusing on the details that are most relevant to the problem at hand.
