Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.
There are many reasons to study economics, including
1.To learn a way of thinking
2.To understand society
3.To understand global affairs
4.To be an informed voter
Economics has three fundamental concepts:
a. Opportunity cost,
b. Marginalism, and
c. Efficient markets.
a. Opportunity cost is the best alternative that we forgo, or give up, when we make a choice or a decision.
b.Marginalism and Sunk Costs: Suppose, for example, that you live in New Delhi and that you are weighing the costs and benefits of visiting your mother in Vashi. If business required that you travel to Mumbai, the cost of visiting mom would be only the additional, or marginal, time and money cost of getting to Vashi from Mumbai.
Example: For an airplane which is about to take off with empty seats, the marginal cost (the cost of producing one more unit of output) of an extra passenger is essentially zero; the total cost of the trip is essentially unchanged by the addition of an extra passenger.
Sunk Costs are costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.
c.Efficient market is one in which profit opportunities are eliminated almost instantaneously. Examples: (1) In a queue, say at a toll booth or for clearing a multiple register grocery line, a profit opportunity will exist if one line is shorter than the others. (2) If you get a hot tip on the stock market, you might be skeptical. If the tip is valid, there will be an immediate rush to buy the stock, which will quickly drive its price up.
It is useful to understand society better.
Past and present economic decisions have an enormous influence on the character of life in a society. E.g. current state of the physical environment, level of material well-being, nature and number of jobs are all products of the economic system
One of the greatest economic impact on a society was in England during the late 18th and early 19th centuries, a period now known as the Industrial Revolution. - Increases in agricultural productivity,
- new manufacturing technologies
- more efficient forms of transportation
Discipline of economics took place during this time: - Adam Smith's Wealth of Nations(1776);
- Others were David Ricardo, Karl Marx, Thomas Malthus, and others.
What about today?
- Late 1990s marked the beginning of a new Industrial Revolution. - "e" revolution: the way we buy and sell products, the way we get news, the way we plan vacations, the way we communicate with each other, the way we teach and take classes, and so on
How does one make sense of all this?
- What will the effects be on the number of jobs, the character of those jobs, the family incomes, the structure of our cities, and the political process, both in India and other countries?
News headlines are filled with economic stories.
All countries are part of a world economy, and we need to understand basic economic links among countries such as: - protection from foreign competition by taxing and quotas; - the long-term importance of unrestricted trade amongst countries; - the overall reach and impact of WTO
Should genetically produced food be allowed to be traded globally? Some countries oppose such "man-made" food for health reasons. Is this a legitimate concern of some nations or is it just a way of protecting domestic farmers from cheap foreign competition? Or
.does it stand in the way of food research that may hold the promise of feeding the poor around the world?
Another global issue is the widening gap between rich and poor nations. In 2000, world population was over 6 billion. Of that number, nearly 5...
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