Definition of economics

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  1. Definition of Economics Overview:
  2. Definitions and Terminology
    • Scarcity
    • Choices
    • Incentives
    • Economics
  3. Two Branches of Economics
    • Microeconomics
    • Macroeconomics
  4. How a Market Works
    • Goals of Buyers an Sellers
    • Interaction between buyers and sellers
    • Function of the Market
  1. Understanding the Definitions and Terminologies
    I have a(n) ______________ because I am not able to satisfy all my wants.
    1. Choice
    2. Incentive
    3. Greed
    4. Scarcity
  2. Because we face scarcity, we must make ____________________.
    1. Choices
    2. Incentives
    3. Greed
    4. Scarcities
  3. Understanding the Branches of Economics
    Which of the following is not an example of Microeconomics?
    1. The unemployment rate of a country
    2. How much an individual company makes
    3. Taxes and subsidies of a product
    4. Competitive Market
  4. Understanding How the Market Works
    What is the goal of a buyer (consumer)?
    1. Gain max profit
    2. Sell supplies of a product
    3. Demand a product for a high price
    4. Gain max utility
  5. When supply and demand are in balance, then we will have ___________________.
    1. An equilibrium price
    2. No excess
    3. No shortage
    4. All of the above
Topic Notes

Definitions and Terminologies

Scarcity is the inability to satisfy all our wants. This is due to having unlimited wants but having limited resources.

Choices are made because we can’t have everything that we want. Choices are made because of scarcity.

An incentive is a reward that encourages an action or a penalty that discourages an action.

Economics is a social science that looks at the choices that individuals, businesses, governments, and entire societies make as they have scarcity and incentives that influences these choices.

Two Branches of Economics

Microeconomics is a branch of economics that studies the choices and behaviors of individual and firms, the way choices impact the market, and the influences of governments.

Macroeconomics is the study of performances of national and global economies.

How the Market Works

The goal of the buyers (consumers) are to gain max utility, and their demand for a specific product varies with price.

The goal of the sellers (producers or firms) are to gain max profit, and their supply of a specific product varies with price.

Interaction between buyers and sellers determine the market price. This price determines how much buyers will consume, and how much sellers should produce.

Function of the market
  1. Exchange of goods between buyers and sellers.
  2. Define equilibrium price

Equilibrium price happens when goods supplied are equal to what is being demanded. In other words, there are no excess or shortage of the product.