• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

What is Economics? What do Economists do?

Extracts from this document...

Introduction

Economics CHAPTER1 What Is Economics? Economics and the world around us. Defining Moments Define Economics: All economic problems arise because of scarcity: our wants exceed the resources available to satisfy them. Rich and poor alike are faced with scarcity. Scarcity means that there is not enough of that item to satisfy everyone who wants it. The opposite is abundance. Things that are scarce are also know as Economic Goods, which means that if the good has no cost or is given away free, then the amount of the good that people want is greater than the amount that is available (e.g. clean air). On the other hand a Free Good is a good with enough quantity to satisfy wants even at zero price (e.g. air with no pollution). Thus, the basic and fundamental Economic Problem is Scarcity. We can define Economics as the study of how people choose to use their scarce resources (land, labor, capital) to satisfy their unlimited wants. Choice and Opportunity Cost (opp cost) � Where there is scarcity there has to be choice. Since your time is scarce you have to choose how to spend it. ...read more.

Middle

2) How are goods and services produced? Do we use people or machines to produce the goods? 3) Who consumes the G&S that are produced? For Whom The answer depends partially on the distribution of income. Then, What determines what we earn? 4) Where are goods and services produced? Do we produce goods in Japan, in Mexico, or in the US? 5) When are G&S produced? Production varies over time: seasonal factors, business cycle Eight ideas that define the Economic way of thinking Idea 1: Every choice involves a cost. Whatever we choose to do, we could have done something else instead. A choice is a tradeoff - we give up something to get something else - and the highest valued alternative we give up is the opportunity cost of the activity chosen. Idea 2: We make choices in small steps, that is, at the margin... choices are influenced by incentives. When deciding whether to allocate more or less resources to an activity, the decision is not "all or nothing" but "a little bit more" versus "a little bit less": we make choices at the margin. MB vs. ...read more.

Conclusion

An economic theory is a generalization that summarizes what we think we understand about the economic choices that people and firms make. Cause and Effect / Logical Fallacies: To understand the role of each factor in producing an effect, we want to hold all other factors constant and change just the factor we are interested in. 1) Ceteris Paribus Fallacy Ceteris paribus is a Latin phrase, meaning "everything else remaining the same." E.g. if the price rises and sales rise as well, to conclude that a higher price brings about greater sales is a ceteris paribus fallacy. However, It is difficult to vary only one variable when testing economic models. 2) Fallacy of Composition The statement that what is true of the parts is true of the whole, or what is true of the whole is true of the parts. Example: "Speed kills." 3) The False-Cause Fallacy or Post Hoc Fallacy The error of reasoning that a first event causes a second event because the first occurred before the second. � Economic policy objectives � economic efficiency � equity � economic growth � economic stability � The economy allocates scarce resources among competing uses � The economy consists of Economic Agents: � decision makers - households, firms, governments � markets � goods markets - for goods, services � factor markets - for labor, land, capital, entrepreneurial ability ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. CASE STUDY OF OPEC

    Hence, Country A will produce OQ1 and Country B will produce OQ2, making the total output equal to OQ. This allocation of output between Countries A and B will assure maximum joint profits, which are equal to the profits made by Country A-PABC and Country B-PDEF.

  2. Extended Essay Economics

    I was told that this was not at all the case and that due to competitors; the firm really didn't have much influence when setting their prices. This also fits into another aspect of an oligopoly. In an oligopoly, a firm has limited control over product price because of mutual interdependence (assuming there is no collusion between firms.)

  1. Growth and Development Problem Set - IB Economics exam questions and answers.

    and all spending on new construction (housing, etc). * Government purchases (G) - refers to all spending on goods and services by governments at levels within a country. (national, regional, etc) It also includes purchases by the government of factors of production, including labor services. * Net exports (exports minus imports, i.e.

  2. Macro Economics Notes

    profits = 100 000, public sector profits = 90 000, rent = 120 000, interest = 70 000, stock appreciation = 40 000, Statistical error = (6000) GDP = Net property income from abroad = 30 000. GNP = Output Method Agriculture = 150 000, energy 90 000, manufacturing 300

  1. Mutual Funds vs ETFs

    The way this tool works was very simple, the procedure of its working was to own a representative collection of securities. This collection was based on tracking the current market index at that time. The tracking of index was done by statistical sampling of the market trend.

  2. Old IB Questions

    Part B: Essay 5. a) There are two ways that firms operating in different market structures compete. First of the two is price competition. Price competition among firms occurs when a firm lowers its price in order to attract customers away from rival firms, and thereby increase its sales at the expense of other firms.

  1. The Benefits of Microcredit to Bangladesh

    environment, even the poorest of the poor can peel off doubts and start exploring their abilities to find a life with full human dignity. Spurs social change: Micro credit had done what billions of dollars worth of AWACS (Air Borne Warnings and Control System)

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    What were the three parts to the Industrial Revolution? How did each of these affect trade and the growth of the European economy? The industrial revolution marked a time of exponential growth beginning in Great Britain and eventually spreading across the globe.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work