Basic Concept of Economics and Introduction to Micro Economics
What is Basic Concept of Economics and Introduction to Micro Economics?
The social science that studies how people use scarce resources to satisfy their unlimited wants.
Key points
- Understand the core problem of scarcity in economics.
- Differentiate between microeconomics and macroeconomics.
- Identify the main activities studied in economics.
- Grasp the concept of opportunity cost.
Common exam trap
Confusing microeconomics with macroeconomics.
Definitions
- Term
Economics
- Meaning
The social science that studies how people use scarce resources to satisfy their unlimited wants.
- Term
Scarcity
- Meaning
The fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources.
- Term
Microeconomics
- Meaning
A branch of economics that studies the behavior of individual economic agents, such as households and firms, and their interactions in markets.
- Term
Macroeconomics
- Meaning
A branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole.
- Term
Opportunity Cost
- Meaning
The value of the next-best alternative that must be forgone to pursue a certain action.
- Term
Production
- Meaning
The process of creating goods and services.
- Term
Distribution
- Meaning
The process of making goods or services available to consumers or businesses.
- Term
Consumption
- Meaning
The use of goods and services by households or individuals.
Learning objectives
Understand the core problem of scarcity in economics.
Differentiate between microeconomics and macroeconomics.
Identify the main activities studied in economics.
Grasp the concept of opportunity cost.
Prerequisites
Basic understanding of societal needs and wants.
Familiarity with the concept of resources.
Common mistakes
Confusing microeconomics with macroeconomics.
Ignoring the concept of opportunity cost in decision-making.
Assuming unlimited resources.
Overlooking the role of incentives.
Keywords
Scarcity
Opportunity Cost
Microeconomics
Macroeconomics
Production
Distribution
Consumption
Resources
Wants
Needs
Economic Agents
Incentives
Practice preview
Which of the following best describes the fundamental problem of economics?…
easy
Microeconomics primarily studies the economic behavior of which of the following?…
easy
Which of the following is NOT one of the central problems of an economy?…
easy