Part 1: cornerstones of economics

Lesson 1

A. EðRðE phrases (to be written out from the English text) for translation by ear.

PART 1: CORNERSTONES OF ECONOMICS

People often refer to the financial aspects of business or their personal lives as economics, but the subject of economics encompasses a much broader spectrum of human behavior than money and business alone. Just as connecting the straight-edged pieces is a good start in solving a jigsaw puzzle, this first part of this book introduces building blocks for an understanding of economics. These basic concepts are then applied to a variety of problems in the rest of this text to provide a relatively complete picture of the scope of economics.. Core economics concepts are the themes of Chapter 1. Our first topic, scarcity, arises because the sum of human wants exceeds the world's capacity to produce goods —economics would be unnecessary if scarcity evaporated. We then survey various resources and examine how scarcity makes choices necessary and opportunity costs unavoidable. Economists assume that people make rational decisions that they (at times, incorrectly) expect to serve their own self-interest. Attempts to maximize self-interest tend to yield economic efficiency because net benefits are maximized. Our second set of building blocks centers on methods economists use to study the way the world works and the division of economics into positive (scientific) versus normative (prescriptive) components. We also distinguish microeconomics which examines choices by individual decision-makers and patterns of exchange- (trade) between individuals and between nations, from macroeconomics, which focuses on such national economic issues as unemployment, inflation and economic growth, and many international financial issues as well (e.g., exchange rates among currencies). The increasing influence of international trade and finance in countries everywhere raises a variety of both microeconomic and macroeconomic issues. Chapter 2 opens with an overview of the broad roles played by such institutions as households, business firms, and governments in the market economy. Basic interactions among these social organizations are shown in a simple circular flow model. Then we explore how comparative advantage governs efficient patterns of production and trade within and between countries. This provides a background for the production possibilities frontier, a depiction of scarcity and the inevitability of trade-offs. We also survey several allocative mechanisms (e.g., government or the market system) that people use to deal with scarcity in a changing world. This overview of capitalism and its alternatives leads to Chapter 3, where supply and demand are introduced. Supply and demand analysis provides insights into how a market system determines prices and outputs and allows us to interpret a wide range of human behavior, including ways people fine-tune their choices based on how they expect marginal (small) changes to affect them. In Chapter 4, we apply supply and demand to a variety of public policy topics, ranging from agriculture to wage and price controls to the waves of change inundating the international economy.

Дата добавления: 2015-11-14