imp things ig
What is Economics?
- the study of how we make choices based on scarcity.
- The science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. -Lionel Robbins (1932)
- Economics can technically explain everything but struggles to explain the concept of economics.
- Money is a symbol of what others in your society owe you, or your claim on particular amounts of the society’s resources.
Unfortunately or fortunately there is no clear boundary between what falls under economics, some say economics can be used to understand everything (economic determinism), the examples:
- Women’s disproportionate burden of household work including childcare?
- A traditional economist would say this doesn't fall under economics or would overlook the unpaid labour, but the feminist economist would argue that this work has economic value, contributing to human capital and workforce productivity.
- Concentration of lower caste workers in manual scavenging:
- Continuing civil war in several West African countries: economic factors like resource scarcity and inequality causes civil wars.
- Technological Progress: Economic motivation drives innovation , other social factors are also present.
- Economic determinism : Idea that all social phenomena are ultimately driven by economic conditions (it's too simple so this isn't really accepted widely) .
- Interdisciplinary approach : Should economics merge with sociology, political science, and psychology to better explain human behavior? ( it kind of does already in some of the schools of thought)
Microeconomics vs. Macroeconomics
| Feature | Microeconomics | Macroeconomics |
|---|---|---|
| Definition | Study of individual agents such as consumers, households, and firms and is focused on their decision-making processes. | Study of the entire economy as an aggregated system, analyzing large-scale economic factors. |
| Focus | Examines individual choices, pricing mechanisms, demand and supply, and market equilibrium. | Focuses on economic growth, inflation, employment levels, monetary and fiscal policies. |
| Assumptions | Assumes rational behavior such as utility maximization for consumers and profit maximization for firms. | Considers interaction effects, multiplier effects(describes how an initial change in spending or investment leads to a larger overall increase in national income or GDP, as spending cycles through the economy) , and aggregate demand and supply dynamics. |
| Mathematical Tools | Uses calculus, optimization techniques, and game theory for modeling individual behaviors and market outcomes. | Employs aggregation models, econometric analysis, and policy simulation methods. |
| Example | How does the price of an iPhone impact demand in the market? | How does inflation affect national GDP growth and unemployment rates? |