Definitions Of Economics

Definitions Of Economics

Definitions Of Economics

Copyright © 2023 by Amy Wise

All rights reserved

TABLE OF CONTENTS

CHAPTER 1  : INTRODUCTION

CHAPTER 2  : WHERE IS THE BARRY?

CHAPTER 3  : TRUCKS AND EDSEL FAIL

CHAPTER 4  : END OF SALE

CHAPTER 5  : PIONEERING TELEVISION

CHAPTER 1  : INTRODUCTION

This book contains a series of short articles that concisely explain basic economic concepts and provide fundamental knowledge of the market economy. These articles were compiled by the Fulbright Economics Teaching Program (FETP). This is a postgraduate cooperation program between Harvard University's Kennedy School of Government and Ho Chi Minh City University of Economics.

The editors have focused on selecting the most necessary concepts and knowledge and presenting them in a concise, lively, sometimes witty style, with close examples from real life. Vietnam economy. Thanks to that, the content of economics, which is often dry and difficult to understand, has become bright, light, and interesting. Besides, the presentation in bilingual English - Vietnamese format also brings added value to readers.

These articles were previously published in Saigon Times Daily (belonging to the Saigon Economic Times group) in the years from 2002 to 2004. Now because of their usefulness to economics students, in particular Particularly and for many people interested in economics in general, the editors have gathered, edited, and rearranged to make this book.

On this occasion, we would like to thank the Fulbright Economics Teaching Program for agreeing to publish this useful book within the framework of the Knowledge Bookshelf of the Saigon Times Foundation; At the same time, contribute all royalties to the Saigon Times Foundation to use in scholarship grants that have been continuously conducted for many years.

Saigon Times Foundation

(GroupSaigon Economic Times)

PART 1: MICRO ECONOMICS - MICROECONOMICS

1. Definitions Of Economics

Some version of the traditional definition of economics is found in almost every introductory economics textbook:

Economics is the study of how scarce resources are most efficiently allocated among alternative goals.

When an economist refers to scarce resources, they do not necessarily mean something rare, like diamonds. They mean resources that are not available in unlimited quantity at zero cost. Thus, scarce resources include everything we can think of that might be used in producing any kind of good or service. Economists often classify resources into three types: capital, labor, and land.

When an economist refers to an efficient allocation, she means that the mix of inputs chosen to produce a given quantity of some good or service is the minimum cost mix of inputs.

Finally, alternative goals simply means that people cannot have unlimited amounts of goods and services, so we have to choose among them.

Because of this, economics is sometimes defined as the study of choice.

An excellent definition of economics was provided by the famous British economist John Maynard Keynes: ... economics is a way of thinking...

This definition reflects the fact that Economists work with models that represent judicious simplifications of the real world. The real world is enormously complex, and thinking about all economic interactions at once is impossible. For any given issue, some economic interactions are important and some are not. Judicious simplifications enable economists to focus on the most important elements of an issue.

If these definitions of economics are true, then economics is a powerful discipline, indeed. In subsequent articles, we will demonstrate that this is true.

1. DEFINITIONS OF ECONOMICS

In introductory economics textbooks, we can find the following traditional definition:

Economics is the study of how to most effectively allocate scarce resources to various alternative goals.

When an economist refers to scarce resources, it is not necessarily something that is rare, such as diamonds, but rather resources that are limited in quantity and have a cost. Scarce resources therefore include all that is used to produce any goods and services. Economists often divide resources into three categories: capital, labor and land.

By efficient allocation, economists mean a set quantity of goods and services produced from the lowest-cost set of inputs.

After all, objectives must vary simply because people cannot have unlimited quantities of goods and services, so they must choose one or the other.

Therefore, economics is sometimes considered the study of choice. Famous British economist John Maynard Keynes gave a very accurate definition: .. economics is a way of thinking...

This definition speaks to the fact that economists use models that reasonably simplify real life. Reality is very complex, we cannot consider all economic interactions at the same time. In a given problem, some economic interactions may be important, but others may not be. Reasonable simplification helps economists focus on the most important elements of the problem.

If the above definitions of economics are correct, economics is truly a highly influential subject. In the following articles, we will demonstrate this fact.

(Saigon Times Daily June 3, 2002)

2. Economic Specializations

Economics is a discipline that covers virtually every area of human activity. When you decide where to buy lunch, when your father decides to save money for his daughter's education, when a company decides to hire more workers, when a worker decides to migrate from the countryside to the city, and when the government decides to let the exchange rate depreciate: each of these is an economic decision.

Individual economists often develop interests in specific types of economic decisions, and they become specialists in various fields of economics. The fundamental dichotomy in economic specializations is the division into microeconomics and macroeconomics.

Microeconomics is concerned with the choices made by individual economic agents and with the behavior of prices and quantities in markets for specific goods or services. A consumer, a worker, and a firm are individual economic agents. The market for mangoes is a subject for microeconomics, as is the labor market. International trade is often considered to be a microeconomic field because the tools of microeconomics are used to analyze the choices facing individual countries in world markets.

Macroeconomics is concerned with thebehavior of the economy at an aggregate level. Important issues that macroeconomists study include economic growth, the rate of inflation, the national unemployment level, and the level of the exchange rate.

Most Economists specialize more narrowly than just in microeconomics or macroeconomics. Popular fields of study include Economic Development, International Trade, International Finance, Labor Economics, Public Finance, Banking and the Financial Sector, the Economics of Education, Environmental Economics, and Health Economics. Related subjects include Accounting and Financial Analysis, Marketing, and Project Appraisal.

Economics students always begin by studying microeconomic principles and macroeconomic principles to establish the foundation for more detailed study of their fields of interest. elaborate, the next few articles will focus on the basics of micro and macro. With this foundation in place, we will be well-prepared to move on to several particular fields.

2. ECONOMIC SPECIALISTS

Economics is a subject that covers almost every field of human activity. Each of the following activities is an economic decision: You choose where to have lunch, a father saves money for his daughter to go to college, a company hires more workers, a worker migrates from the countryside to the city. city, or the government's decision to depreciate the exchange rate.

Individual economists often focus their attention on specific economic decisions and become economic experts in different fields. The basic branches within economics majors are microeconomics and macroeconomics.

Microeconomics focuses on the choices of each economic agent along with the price and quantity dynamics of a certain good or service in the market. A consumer, a worker, a company are all single economic agents. The mango market is a subject of microeconomics and so is the labor market. Foreign trade is similar because the tools of microeconomics are often used to analyze the choices facing individual countries in world markets.

Macroeconomics examines the behavior of the economy at the aggregate level. Macroeconomists study important issues such as economic growth, inflation rates, national unemployment levels, and exchange rates.

Most economists have narrower specializations than microeconomics and macroeconomics. Popular majors include Economic Development, Foreign Trade, International Finance, Labor Economics, Public Finance, Banking and Financial Sector, Education Economics, Environmental Economics, Health Economics international. There are also related subjects such as Accounting and Financial Analysis, Marketing and Project Appraisal.

Economics students always start with the principles of microeconomics and macroeconomics to establish a foundation for deeper learning in their areas of interest. Therefore, in the next articles we will focus on the basic principles of micro and macro. On that foundation we will be ready to delve into other specialized fields.

(Saigon Times Daily June 10, 2003)

3. Invisible Hand

Economists define efficiency in a different way from, say, engineers. An engineer would say that if cook stove A uses less energy to produce die same amount of heat as cook stove B, then cook stove A is more efficient. But the Economist would say that the efficient cooking stove is the one with the lower cost for a given amount of heat produced. Resources, the term in economics for the goods and services which are used to produce other goods and services, should be directed to those areas where society values them most.

Many people in Ho Chi Minh City eat breakfast at small cafes or noodle stands. These people are directing their labor to where it will give them the most value - rather than spending time shopping, cooking and cleaning, they get to work earlier (or sleep a little later) by letting someone else cook breakfast for them. This society values good, inexpensive food that is readily available and resources have flowed into that industry. The sidewalks are crowded with food stalls and vendors.

How does this work? It would seem to be more efficient to have market activities planned. Surely human intervention can do better than the chaotic, unrelated activities of buyers and sellers. Ah, but this is the beauty of market economics, and the genius of Adam Smith, who posited that the market is not chaotic at all, but instead is guided by an invisible hand. As Smith points out, it is not the goodness of their hearts that motivates people to sell food on the street. They are motivated by their own self-interest in having goods and opportunities for themselves and their families. This invisible hand is what keeps resources flowing to those activities where they will have the most value, thereby increasing the wealth of the nation.

3. INVISIBLE HAND

Economists define efficiency differently from engineers. If stove A consumes less energy while giving the same amount of heat as stove B, an engineer would consider stove A to be more efficient. But economists say an efficient stove is one that produces more heat at a lower cost. Economics calls goods and services used to produce other goods and services resources, which should be directed to areas where they are most valued by society.

Many people in Ho Chi Minh City eat breakfast at cafes or pho stalls. They allocate their labor where it is most valuable to them - instead of wasting time shopping, cooking, or cleaning, they can work earlier (or sleep later) by letting others prepare breakfast for them. Society recognizes the value of fast, delicious food at a moderate price. Resources flow into this industry, the sidewalks are filled with eateries.

How does the system work? It seems that market activities will be more effective if included in the plan. Surely having humans intervene is better than letting the activities of buyers and sellers take place in a chaotic manner. But this is the beauty of market economics and the genius of Adam Smith, who realized that the market is actually not chaotic at all but is guided by an invisible hand. People sell on the street not from the motive of a generous heart, but from the benefit of bringing goods and opportunities to themselves and their families. It is the invisible hand that makes resources flow. into activities where they have the highest value, thereby enhancing national wealth.

(Saigon Times Daily December 8, 2002)

4. Opportunity Cost

When an economic choice is made, Economists measure the cost of that choice in terms of opportunity cost, which is defined as the value of the best alternative forgone.

Self-employmentprovides an interesting example of opportunity cost. Suppose that you start a software firm. You rent office space, hire programmers, and sell software. Suppose that after one year, all of your direct costs can be listed as follows:

Office rent: US$12,000 Salaries : US$24,000 Utilities : US$10,000

Total costs for