This summary contains the following chapters 1, 3, 4, 5, 6, 10, 11, 12, 13, 20, 21, 22 of the book Economics, 10th European Editions by Parkin, Powell and Matthews. This book is compulsory for the module Principle of Economics during the 1st year of International Business part-time.
,Table of Contents:
Chapter 1: What is economics?.............................................................................. 2
Chapter 3: Demand & Supply................................................................................. 4
Chapter 4: Elasticity............................................................................................... 9
Chapter 5: Efficiency & Equity.............................................................................. 13
Chapter 6: Government actions in markets..........................................................15
Chapter 10: Outputs and costs............................................................................. 17
Chapter 11: Perfect competition...........................................................................21
Chapter 12: Monopoly.......................................................................................... 25
Chapter 13: Monopolistic Competition..................................................................30
Chapter 20: Measuring GDP and Economic Growth..............................................32
Chapter 21: Monitoring Jobs & Inflation................................................................37
Chapter 22: Economic Growth.............................................................................. 43
1
, Chapter 1: What is economics?
The definition of economics is:
The social science that studies the choices that individuals, business,
governments and entire societies make as they cope with scarcity and the
incentives and the incentives, and the incentives that influence and reconcile
those choices.
Economics is divided into two parts:
Microeconomics: The study of the choices individuals and the businesses
make. The way these choices interact in markets and the influence of
governments.
Macroeconomics: the study of the performance of the national economy and
the global economy.
Incentives:
Reward: Encourages an action.
Penalty: Discourages an action.
Factors of production:
Land: natural resources that are being used to produce services and goods.
Land earns rent.
Labour: The physical and mental efforts of all of the people who work on
farms and construction sites and in factories, shops and offices. Labour is the
work time and work effort that people devote to producing goods and
services. Labour earns wages.
Capital: The tools, instruments, machines, buildings and other constructions
that businesses use to produce goods and services.
Financial capital: Money, shares, bonds. This is used to borrow money to
purchase capital. But financial capital is not used for the production of goods
and services. Capital earns interest.
Entrepreneurship: The human resource that organizes labour, land and
capital. Entrepreneurs come up with new ideas. Entrepreneurship earns a
profit.
Choices:
Self – interest: making a choice that is good for yourself.
Social interest: making a choice that is good, the best for the whole society.
Efficient choices: A situation whereby no one is better or worse of when
decisions are made.
Choices that are made for social interest are affected by:
Globalisation
The information – age monopolies
Climate change
Financial instability
Making choices is a consequence of scarcity.
2
, Trade-off:
An exchange: giving up one thing to get something else.
Rational choices:
Comparing costs and benefits in order to achieve the greatest benefit over the
cost, for the person making the choice.
Opportunity costs:
The highest – valued alternative that must be given up. For example: When you
are studying at the university you spend much time on studying and much
money on tuition fee and books.
Marginal benefits:
The benefit that arises from an increase in activity when doing extra work.
Marginal costs:
The increase in an activity when you do less.
Choices respond to incentives:
Choices are based on the marginal benefits we gain and the marginal costs we
suffer.
Economics as a social scientist:
Social scientist, economics seek to discover how the economic world works by
making a distinction between positive and normative.
Positive statement:
A statement that is true and is supported by facts. The statement can be tested
in order to see if it’s correct.
Unscrambling cause and effect:
Economists research the cause and effect of positive statements. They do this by
conduction statistical investigations, experiments in order to find correlations.
Economist as policy advisor:
Economist is used as an advisor for government and businesses for making
personal decisions.
Economic model:
A description that is used for research of the cause and effect.
3
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