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Eco 2 Summary
Eco 2 Summary
Economic is the study of how human being coordinate their wants and desire given decision making, social customs and political realities of that
society
Microeconomics Macroeconomics
Is a branch of economics that deals with the decision making Is a branch of economics that deals aggregates and average
of individuals of entire economy
Example : Example:
Individual income National savings
Individual consumption Aggregate investment
Individual saving National output
Individual expenditure General price level
Individual investment Inflation and deflation
It take into account small components of the economy It take into account the whole economy
Known as price theory Known as income theory
It concerns with the optimization of goals of individual It concerns with the optimization of goals of entire economy
It study the flow of economic resources from individual to It study the circular flow of income and expenditure
another individual between different sectors in the economy
Help in making appropriate policies for resource allocation Help in making appropriate policies for controlling price level
Limited resources ---- Scarcity of goods and services --- Unlimited wants and needs -- must make choices
a- Absolute Scarcity : there is insufficient quantities of resources to meet human wants and needs
b- Relative Scarcity : there may be physical resources but there is a problem about supply and distribution
Opportunity Cost: is the benefit forgone for the next best alternative to the activity you have chosen
Production Possibility model: Is a curve that show the tradeoff among choices we have
1- Improvement of technology
2- Discovering resources
3- Improving economic institution
Income accounting: set of rules and definitions for measuring economic activity
Gross Domestic Product: the total value of all final goods and services produced in a given county at a given period
Gross national Product: the aggregate final output of citizens and business in an economy in one year
Depreciation: decrease in the value of the firm capital due to wear and tear
GDP = C + I + G + (x-M)