Microeconomics and Life
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Economics is the study of how people manage resources
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Economics is divided into two broad fields
Micro-economics
is the study of how individuals and firms manage
resources
Macroeconomics
is the study of the economy on a regional, national, or
international scale
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Prior to the Great Depression, economics was dominated by the classical theory
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The classical theory states that the economy balances itself out where supply and
demand interact and that if the supply and demand aren't equal, the market will
adjust itself so the equilibrium will prevail.
The Great Depression disproved this as both the goods-and-services
market and the labour market had a surplus, the markets were not in
equilibrium. Therefore, demand does not always equal supply
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Keynesian Economics:
New theory that economics follows was introduced by John
Maynard Keynes, he ecplained why markets may not need to be in equilibrium for them
to operate.
Economists tend to break down problems by asking a set of four questions:
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What are the wants and constraints of those involved?
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What are the trade-offs?
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How will others respond?
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Why isn't everyone already doing it?
Scarcity
What are the wants and constraints of those involved?
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Scarcity is defined as the condition of wanting more than we can get with available
resources
Performance and Decision Making
What are the trade-offs?
