THEME 1.

INTRODUCTION IS
TO THE ECONOMIC THEORY.
 
1. Concept of economy. Object and method of
economic theory
2. Structure and functions of economic theory.
3. Economic resources and their kinds.
4. A concept of possibilities of productions and its
correlation is with the problem of elections.
1.1 Concept of economy. Object
and method of economic theory.
 At first, an economy is the system of economy in wide sense is an
aggregate of financial and spiritual terms of production, material
and immaterial welfares, in-use people for transformation of
matter of nature with the purpose of satisfaction of the
necessities, providing of terms of life-support of population.
 Secondly, an economy is an aggregate of economic relations
which are folded between people in the process of their vital
functions.
 Thirdly, an economy is knowledge which on the certain stage
outgrows in science about conformity to law of economic life,
related to it by the system of relations between people. It is
science about that, how in the conditions of the limited resources
to find the methods of their most effective use for satisfaction of
public and personal necessities.
Economic theory is social science which
investigates the problems of the
effective use of the limited resources
for satisfaction of individual and public
necessities, and also economic
relations, which are folded between
people, classes and task forces in the
process of production, distributing,
exchange and consumption of material
welfares and services in the conditions
of deficit of resources, possibility them
the alternative use.
1.2 Structure and functions of
economic theory
STRUCTURE OF
EKONOMICHEI OF
THEORY

MICROECONOMICS
is a conduct of separate
market subjects

MEZOEKONOIIKA is
MACROECONOMICS SUPERECONOMY is
functioning of separate
is functioning of the (international economy)
subsystems of и
national economic functioning of world
industries of national
system on the whole economy on the whole
economy
 The functions of economic
theory are presented by a chart
FUNCTION
ECONOMIC
THEORIES

COGNITIVE

METHODOLOGICA
PRACTICAL PROGNOSIS
L
 A cognitive function
 consists in that the subjects of market relations,
studying conformities to law of economic life,
cognize them internal, deep essence and on this
basis can build the conduct on rational basis,
not likened to «deaf, such which tries to
estimate an orchestra».
 methodological function
 With it the constrained and methodological
function, which assumes, in particular, such
direction of analysis of economic processes and
phenomena, which enables to discover after
external, such, that quite often distort economic
reality, by the forms of display most essence
their lines. Because, «that a form is perfect in
essence, that can hide deformity of essence,
when essence meets with it, all that it is hidden,
opens up»
 A practical function
 consists in making of scientific
recommendations for the leadthrough of
effective economic policy, ground of methods
of the optimum use of the limited resources
with the purpose of increase of standard of life
of population of country.
 A prognosis function
 A prognosis function assumes development
of the scientifically grounded prognoses
socially – economic development of national
economy, that it is a hypothesis about the
future state of economy, indexes which must be
attained in the future during the leadthrough
of certain economic policy.
 1.3 Economic resources
and their kinds
 A production is a process which is carried out
between a man and nature, as a result there is
adaptation, change of matter of nature for the
necessities of man.
 Answer. A man works in an order to satisfy the
necessities. He can not leave off to conduct, also
does not as leave off to consume. Therefore a
production is a process continuous, such, that
recommences constantly. And in such quality he
carries the name of «recreation».
 In the process of production through the public division of
labor people enter into mutual relations with each other,
and these relations are named economic or production
relations . Their character depends on many factors –
economic and social.
 Factors of production are basic resources, components,
elements or objects of production, which appear him by
motive force, render decision influence on effectiveness
and his efficiency.
 Traditional approach of classic political economy as
selected the factors of production earth, labour, capital. The
modern complements this triad such factors, as enterprise
ability, information, modern science which grew into
productive force. Name and ecological factor of production
which renders double influence on his dynamics, - or as an
impulse, or as a brake. Will consider short description of
factors.
 Earth
 Earth is a natural resource. In agriculture it is a
main mean of production, pose by him is a raw
material source. It is a matter of nature, article
of labour which a man modifies in the process
of labour. Neoclassical direction is examined
by this resource as capital, dissociating him
from natural terms.
 A capital
 A capital is an aggregate of capital goods -
instruments, materials, raw material and others
like that He is a source of profit. Modern looks
are extended by the concepts of capital to the
immaterial forms. Human capital – knowledge,
capabilities, qualification - realized by a man in
everyday labour activity which provides the
receipt of higher profit.
 Labour
 Labour is expedient activity of man, directed
on transformation of matter of nature, creation
of material welfares and services for
satisfaction of necessities of people.
 An enterprise
 An enterprise is unique ability of advancement
of innovations, that appears rarely, to the
market by risk activity. A businessman
operates in the conditions of vagueness,
choosing the most effective combination of
factors, co-ordinating activity of participants of
production. (More detailed description some
from the adopted factors will be considered in
the proper sections below).
 Information
 Information as factor of production – it and
object and process of creation, storage,
transmission, use of the special resource,
contributory infringement to making of
adequate economic decisions which provide
the effective functioning of firm and public
progress.
 Science
 Science as creates the factor of production to
the innovation. Innovations provide the future.
The world without science is the world without
the future.
1.4 A concept of possibilities of productions and
its correlation is with the problem of choice.

 Possibilities of productions describe fundamental contradiction of

economic life : unquenchable necessities are the limited resources.
With the problem of choice it is correlated straight and directly,
because graphicly illustrates the manufacturabilities of some volume
of one type of products at this volume other at the certain amount of
present resources and this level of development of technique and
technology.
 Any economic system decides a question that, as, how many, for
whom to conduct. Dictates answers for these questions narrow-
mindedness of resources. Therefore people always stand before a
choice – why to give advantage: to consumer goods or capital goods,
necessaries or articles of luxury, to the military or peaceful products.
 Possibilities of productions are different combinations of volumes of
any (two) commodities at this volume of resources and this level of
development of technique and technology.
Scarcity and Choice for a Single Firm
Scarcity and Choice for the
Entire Society