Several people imagine that economics is about money. In fact, this is true to some extent this is true since economics has a lot to do with money: with how much money people are paid; how much they spend; what it costs to buy various items; how much money firms earn; how much money there is in total in the economy. Even if the large number of areas in which our lives are concerned with money, economics is more than just the study of money (Sloman, 2006).
In general, the subject matter of economics is generally divided into four parts. They are Production, Consumption, Exchange and Distribution. Production means producing things or creation or addition of utilities to the goods and services to make them capable of satisfying various wants. Consumption deals with human wants and their satisfaction. Exchange refers to transfer of goods and services through the medium of money. Finally, distribution refers to the sharing of income from production by four factors of production namely, land, labor, capital and organization (Sloman, 2006).
Table of Contents
Chapter One
1.1 Introduction to Economics Concept
1.2 What do Economists Study?
1.3 The Central Economic Problem
1.3.1. The problem of allocation of resources
1.3.2. The problem of full utilization of resources
1.4 Subject matter of Economics
1.4.1. Microeconomics
1.4.2. Macroeconomics
1.5 Definitions of Terminology
1.6 Economic Systems
1.7 The Basic Decision-Making Units
1.8 Product and Factor Markets
1.9 The Production Possibility Frontier (PPF)
1.9.1. Production possibility frontier and the opportunity cost
1.9.2. Special case of PPF: Straight Line PPF
1.10 The Theoretical and Empirical Approach in Economics
1.10.1. The theoretical approach
1.10.2. The Empirical Approach
1.11 Specialization and Comparative Advantage
Chapter Two
2.1 Demand
2.1.1. The law of demand and demand curve
2.1.2. Demand function
2.1.3. Market demand
2.2 Supply
2.2.1. The law of supply
2.2.2. Determinants of supply
2.2.3. Market supply
2.3. Market Equilibrium
2.4. Government Price Determination
Chapter Three
3.1 Elasticity of Demand
3.2 Elasticity of Supply
Chapter Four
4.1 The Concept of Utility
4.1.1. Law of diminishing marginal utility
4.1.2. Total utility and marginal utility
4.2 Consumer Choices
4.3 Utility Maximization
4.4 Income and Substitution Effects
Chapter Five
5.1 Theory of Production
5.1.1. Classification of inputs
5.1.2. Short run production relationships
5.2. Cost of Production
5.2.1. Implicit and explicit costs
5.2.2. Costs of production the short run
5.2.3. Production costs in the long run
5.2.4. Returns to scale
Chapter Six
6.1 Pure Competition/Perfect Competition
6.1.1. The demand for a perfectly competitive firm
6.1.2. Revenues for a perfectly competitive firm
6.1.3. Profit maximization of competitive firm
6.2 Monopoly
6.2.1 Profit maximization for monopoly
6.2.2 Price discrimination
6.3 Monopolistic Competition
6.4 Monopolistic profit maximization
6.5 Oligopoly
6.5.1 Cartels and Collusions
Chapter Seven
7.1 Gross Domestic Product (GDP)
7.1.1. GDP exclusions
7.1.2. Approaches to GDP calculation
7.1.3. Nominal and Real GDP
7.1.4. GDP shortcomings
7.2 Gross Domestic Product (GDP) versus Gross National Product (GNP)
7.3 Other National Accounting Systems
7.4 Importance of the Estimation of National Income
7.5 The Business Cycle
7.6 Unemployment and Inflation
7.7 Inflation
Chapter Eight
8.1 Aggregate Demand
8.2 Aggregate Supply
8.3 Aggregate Supply and Demand: Equilibrium
Chapter Nine
9.1 Expansionary Fiscal Policy
9.2 Contractionary Fiscal Policy
9.3 Problems with Fiscal Policy
Chapter Ten
10.1 The Functions of Money
10.2 The Money Supply
10.3 The Demand for Money
10.4 Tools of Monetary Policy
10.5 Monetary Policy in Action
Objectives and Topics
The primary objective of this work is to provide a simplified overview of fundamental economic principles, covering both microeconomic and macroeconomic theories. The text aims to answer the central economic problem of how societies allocate scarce resources through different market structures and fiscal/monetary policies.
- Foundational economic concepts and the problem of scarcity.
- Mechanisms of demand, supply, and market equilibrium.
- Analysis of production, costs, and market structures (Perfect Competition, Monopoly, etc.).
- National income accounting, business cycles, and fiscal/monetary policy tools.
Excerpt from the Book
1.1 Introduction to Economics Concept
The word economy comes from the Greek word oikonomos, which means “on who manages a household.” Though it might look strange, households and economies have much in common. Of course a household must allocate its scarce resources among its various members, based on each member’s capabilities, endeavors, and interests. Similarly, a society must find some way to decide what jobs will be done and who will do them (Mankiw, 2015).
Economics as a subject came into existence with the popular book publication on “An Enquiry into the Nature and Causes of Wealth of Nations” by Adam Smith in 1776. At that time it was termed as Political economy, which remained working at least until the middle of the 19th century (Dutta, 2006).
Different economists defined economics in a different way. However, a few important definitions commonly referred in the economic theory are discussed hereunder.
The early economists like Walker defined economics as a science of wealth. Walker (1892) defined economics as a body of knowledge, which relates to wealth. Adam Smith, who is also observed as father of economics, stated that economics is a science concerned with the nature and causes of wealth of nations (Smith, 1998). That is, economics focus on how to acquire more and more wealth by a nation. Mill (1848) discoursed that economics is the practical science dealing with the production and distribution of wealth. Thus, all these definitions are associated with wealth.
Summary of Chapters
Chapter One: Introduces basic economic concepts, definitions, and the central problem of scarcity and resource allocation.
Chapter Two: Examines the mechanics of demand and supply, including price determination and equilibrium.
Chapter Three: Covers the concepts of elasticity regarding demand and supply, and their determinants.
Chapter Four: Explores consumer behavior and utility theory, focusing on diminishing marginal utility and utility maximization.
Chapter Five: Details the theory of production and costs, including short-run and long-run relationships and economies of scale.
Chapter Six: Analyzes various market structures ranging from perfect competition to monopoly, monopolistic competition, and oligopoly.
Chapter Seven: Discusses national income accounting, GDP, GNP, and the business cycle.
Chapter Eight: Explains aggregate demand and aggregate supply models as tools for national economic analysis.
Chapter Nine: Covers fiscal policy, including expansionary and contractionary measures and associated implementation problems.
Chapter Ten: Describes monetary policy, the functions of money, and the tools used by central banks to manage the economy.
Keywords
Economics, Scarcity, Opportunity Cost, Microeconomics, Macroeconomics, Demand, Supply, Market Equilibrium, Utility, Production Function, Perfect Competition, Monopoly, GDP, Fiscal Policy, Monetary Policy
Frequently Asked Questions
What is the core subject of this book?
This book provides a simplified introduction to the fundamental principles of economics, covering key theories in both microeconomics and macroeconomics.
What are the primary themes covered in the text?
The central themes include resource allocation, market forces (supply and demand), consumer behavior, production costs, market structures, national income accounting, and government economic policies.
What is the main goal of the author?
The main goal is to make complex economic theories accessible to students by simplifying principles and using real-world examples to explain how societies manage limited resources.
What scientific methods are applied in the text?
The text employs both theoretical approaches, utilizing scientific models and assumptions, and empirical approaches, which test these theories against actual economic data.
What topics are discussed in the main body regarding market dynamics?
The main body treats the behavior of individual units through supply and demand analysis, the decision-making processes of firms regarding production and costs, and how these individual actions aggregate at the national level.
Which keywords define this work best?
Essential keywords include Scarcity, Opportunity Cost, Elasticity, Market Equilibrium, GDP, and Fiscal/Monetary Policy.
How does the book explain the difference between a command and a market economy?
It distinguishes them based on how they answer the three basic economic questions: what to produce, how to produce, and for whom to produce, noting that market economies rely on price signals while command economies use central government planning.
What is the significance of the "Production Possibility Frontier" (PPF)?
The PPF represents the trade-offs an economy faces; it illustrates the maximum potential output of two goods given fixed resources and technology, highlighting the concept of opportunity cost.
How is inflation defined and categorized in the later chapters?
Inflation is described as a general rise in price levels, and the book categorizes it into demand-pull inflation (driven by aggregate spending) and cost-push inflation (driven by rising production costs).
What role does the Federal Reserve play in the text?
The text highlights the Federal Reserve's role in monetary policy, specifically how it uses discount rates, reserve requirements, and open market operations to manage economic stability.
- Quote paper
- Gezahagn Kudama (Author), 2019, Fundamentals and Simplified Principles of Economics, Munich, GRIN Verlag, https://www.grin.com/document/498170
