The Basics

OBJECTIVES• introduce students to the basic principles of

economics.

• understand basic economic terms and concepts that can be applied to everyday life.

• recognize how the government policies affect the economy.

• identify how limited resources are divided among the population.

• be familiar with different types of businesses.

INTRODUCTIONEconomics is an abstract compared to the concrete subjects that most students have studied to date. The hard and fast rules of mathematics, grammar, geography, and so on do not exist in the study of economics. Economics does provide many models and processes for guidance, in addition to empirical research which points us in certain directions. However, due to the human element involved in economic decision-making, this makes real-life economics somewhat unclear. It is important that you have a good working definition of economics and an understanding of the basic concepts. Furthermore, it is important that you can understand the definition and concepts into your own life. This will allow you to project these ideas onto other individuals and societies.

What is Economics?

Economics is the study of the ways that individuals and societies allocate their limited resources in

order to better satisfy their unlimited wants.

DISSECTION of the DEFINITION

• Individual decision-making is referred to as Microeconomics.

• Societal decision-making is referred to as Macroeconomics.

• To allocate means to divide among or to distribute in shares.

• Resources are the means to accomplish something.

• Wants are things that are wanted or needed.

The Greek definition of economy literally means “household management”.

Review

• Microeconomics

• Macroeconomics

• Allocate

• Resources

• Wants

• Greek meaning of economics