[Study Note] Economics

Basic concepts of Economics; What is it?

It is important to remember when I talk about “Economics,” it is not a specialized branch of social science but a general understanding of how we maintain our daily lives with others.

Scarcity and Choice

• The economic issues are due to scarcity.
• Scarcity is the economy’s constant base condition. The finite capacity to produce goods and services will always fall short of satisfying everyone’s infinite demand for more.
• Therefore, resources always have alternative uses, and every economic decision is a trade-off. The value of this trade-off is called opportunity cost.

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Economic Problems

First, let’s see what questions we would like to answer using the accumulated knowledge of Economics.

• What to produce
• How to produce
• For whom to produce (How to distribute)

You might remember “Supply and Demand” from the Economics 101 course. Two simple concepts – producing and spending, two of the most common human activities – lead to more debatable topics such as resource allocation, labor, social structures, class conflicts, and morality.

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Resources

• Land: physical land and minerals
• Labor: people
• Capital: machinery, transport
• Entrepreneurship: management (ideas + risks)

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Economic Systems

• Free Market Economy
  • Resources are allocated by supply and demand
• Planned (Command) Economy
  • Resources are allocated by a central institute (government)

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Types of Economics

• Positive vs. Normative
  • Positive Economics: An analysis of economic variables
  • Normative Economics: Value judgment of economic issues
• Micro vs. Macro
  • Microeconomics: Individual decisions of household and companies; the demand and supply within a particular market
  • Macroeconomics: Analyses the general issues of the whole such as inflation, unemployment, business cycles, growth and recession, and international trade
• Ideological Perspectives
  • Neoclassical Economics
    • Based on the tradition of Adam Smith
  • Price (Supply and Demand), Utility, Profit maximization, Rational actors
  • Marxian Economy
    • Based on the mode of production and ownership
    • All modes of production have built-in contradictions that must be resolved through struggle.
  • World Systems
    • Adapt the inter-regional approach instead of nation-state point of view