Download Lecture 1. Economics and the economy

dr Magdalena Klimczuk-Kochańska
Word economics comes from two ancient Greek
words:

Oikos – house

Nomos – law, rule
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Economics is the science that studies how
people use the resources which are at their
disposal in order to meet the different
tangible and intangible needs.
Economics is a science that investigates how
the economy can cope with the problem of
scarcity of resources in opposition to infinity
of needs.

Economics - a science that studies behavior
of economic entity in the use of limited
resources, which can be used in various ways
in the sphere of production, distribution,
exchange and consumption.

The branch of economics that examines the
functioning of individual industries and the
behavior of individual decision-making
units - that is, business firms and
households.

The branch of economics that examines the
economic behavior of aggregates - income,
employment, output, and so on - on a
national scale.
DIVISION OF
ECONOMICS
Microeconomics
Macroeconomics
PRODUCTION
PRICES
INCOME
EMPLOYMENT
Production/output in
individual industries
and businesses
Price of individual
goods and services
Distribution of
income and
wealth
Employment by
individual businesses
and industries
How much steel
How much office
space
How many cars
Price of medical care
Price of gasoline
Food prices
Apartment rents
Wages in the auto
industry
Minimum wage
Executive salaries
Poverty
Jobs in the steel
industry
Number of employees
in a firm
Number of
accountants
National
production/output
Aggregate price level
National income
Employment and
unemployment in
the economy
Total industrial output
Gross domestic
product
Growth of output
Consumer prices
Producer prices
Rate of inflation
Total wages and
salaries
Total corporate
profits
Total number of jobs
Unemployment rate
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Need – is the state of lack and desire to
satisfy them.
Man suffers multiple needs, which he
attempts to satisfy.
1) criterion for the genesis of needs:
 primary needs - determined by the structure
of a phisical organism, determine the
conditions necessary to keep the body alive,
 secondary needs determined by the mental
structure of an individual (social,
psychogenic, education, cultural needs).
2) validity criterion – eg. Maslow's hierarchy of
needs


Goods and services which we purchase have a
positive value because they satisfy our needs.
People have unlimited wants

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Good is a material means of satisfying human
needs.
Free good
Economic good
Consumer good
Production good
Private good
Public good

Services - do not take physical form and can
not be stored.

Issue / factor of production - the good or
service is used by companies to run their
manufacturing processes.
We can distinguish main groups of resources:
1.
2.
3.
4.
5.
Human resources
Natural resources
Capital resources
Enterpreneurship
Technology
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Each agent receives its employee salary:
employment of work – wage, salary
employment of land - a product, lease, rent
employment of capital – percentage
entrepreneurship - high wages, make a
profits

Scarcity – not having an unlimited amount of
something

Scarcity is not a shortage and it is not the
same thing as poverty

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Rarity - refers to a situation in which
available resources for production not
sufficient to meet the needs of the society.
Rarity is the result of scarcity of resources.
Management - constant choices made by
economic untis.
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Decision - the act of choice - conscious or
not - between alternative methods.
Economic decision has two aspects:
positive - make a choice that economic goals
will be achived what resources they devoted
to achieving – benefits
negative - the resignation of other purposes
for which we would have to allocate same of
the available resources - costs
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What good is to be produced and in what
quantities?
How this good should be produced?
For whom is the good to be made?
When this good should be produced?
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Efficiency
Equity
Growth
Stability
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Limited resources and unlimited wants
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Scarcity

Choices
Opportunity Cost