**Class Notes**

**Topic: Introduction to Economics**

**Date: April 10, 2024**

**Instructor: Professor Howe**

**I. Introduction to Economics**

- Economics is the study of how individuals, businesses, and societies allocate scarce resources to satisfy
unlimited wants and needs.

- It is divided into two main branches: microeconomics and macroeconomics.

**II. Microeconomics**

- Microeconomics focuses on individual actors in the economy, such as households, firms, and
industries.

- Key concepts in microeconomics include supply and demand, price determination, consumer behavior,
and market structures (perfect competition, monopoly, oligopoly, monopolistic competition).

**III. Macroeconomics**

- Macroeconomics looks at the economy as a whole, studying factors such as national income,
unemployment, inflation, economic growth, and monetary and fiscal policy.

- It examines the aggregate behavior of households, businesses, and governments.

- Macroeconomic theories and models help explain and predict economic phenomena on a national or
global scale.

**IV. Basic Economic Principles**

1. **Scarcity:** Resources are limited, while wants and needs are unlimited, leading to the need for
choices and trade-offs.

2. **Opportunity Cost:** The cost of choosing one alternative over another; it represents the value of
the next best alternative foregone.

3. **Marginal Analysis:** Examining the additional benefit (or cost) of one more unit of an activity.

4. **Incentives:** Factors that motivate individuals and businesses to act in a certain way, often driving
economic decision-making.

5. **Trade:** The voluntary exchange of goods and services between individuals and nations, leading to
specialization and mutual benefit.

**V. Economic Systems**

- Economic systems determine how societies organize production, distribution, and consumption of
goods and services.

- Major economic systems include capitalism, socialism, and mixed economies.

- Capitalism relies on private ownership of resources and the market mechanism to allocate goods and
services.

- Socialism emphasizes public ownership of resources and central planning by the government.

- Mixed economies combine elements of both capitalism and socialism, with varying degrees of
government intervention.

**VI. Conclusion**
- Economics provides a framework for understanding how individuals and societies make decisions in a
world of scarcity.

- By studying economic principles and theories, we can analyze and evaluate various economic issues
and policies, contributing to informed decision-making and policy formulation.

**Key Terms:**

- Economics

- Microeconomics

- Macroeconomics

- Supply and Demand

- Opportunity Cost

- Marginal Analysis

- Incentives

- Economic Systems

- Capitalism

- Socialism

- Mixed Economy

**Questions for Further Study:**

1. How does the law of demand illustrate the relationship between price and quantity demanded?

2. What factors influence a nation’s economic growth rate?

3. Discuss the role of government in a market economy versus a command economy.

4. Can you give examples of real-world trade-offs individuals or businesses face in decision-making?