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MICROECONOMICS NOTES (EC101)

COMPILED BY T. SUNDE

AND CHARUMBIRA M

Department of Economics

Midlands State University

LEVEL: FIRST SEMESTER OF FIRST LEVEL

August 2006

CHAPTER 1 : FUNDAMENTAL CONCEPTS OF ECONOMICS

ECONOMICS is the study of the ways that individuals and societies allocate their limited resources to try to satisfy their unlimited wants. The major task of economics is studying and evaluating alternatives.

ECONOMICS is a decision science concerned with the choices we make and the consequences of those choices for others and ourselves. In fact, the central forms of economics are on choice and decision-making.

ECONOMICS is also a behavioral and historical science, drawing upon and extending the research of psychologists, anthropologists, sociologists and historians. Moreover, economics is a reflective and moral science often involving the study of problems that puzzle legal scholars, political scientists and philosophers.

MACROECONOMICS is the study of very large, economy wide aggregate variables such as various indicators of the levels of total economic activity. Thus macroeconomic analysis is concerned with things like the banking and monetary systems, and how the levels of Gross National Product (GNP), National Income (NI), unemployment, inflation and economic growth are determined. Macroeconomics also considers such things as the effect of broad government policies, including total government spending and the rates and levels of taxes or rates of growth in the supply of money.

MICROECONOMICS is concerned with individual decision-making; the allocation of resources; and how prices, production, and the distribution of income are determined. It focuses upon the individual and interactive behaviors of households, firms, and fairly specific governmental units. Thus microeconomics emphasizes the composition of economic activity and hence components of our economic system.

All contemporary economists agree that...