ECO401 Handouts Set 2

ECO401 – INTRODUCTION TO ECONOMICS

Lesson No.

Topics

Page No. Lesson 01 Lesson 02

Exercises

Lesson 03 Demand, Supply and Equilibrium Analysis……………...…………….... Lesson 04 Demand, Supply and Equilibrium Analysis (Continued)……………..… Lesson 05 Demand, Supply and Equilibrium Analysis (Continued)………………..

Exercises

Lesson 06 Elasticities ……………………………………………………………... Lesson 07 Elasticities (Continued)… ………………………………………............ Lesson 08 Elasticities (Continued)……………………… ……………….................

Exercises

Lesson 09 Consumer Behavior: Consumption Side Analysis………………………. Lesson 10 Consumer Behavior: Consumption Side Analysis (Continued)…………. Lesson 11 Consumer Behavior: Consumption Side Analysis (Continued)…………. Lesson 12 Consumer Behavior: Consumption Side Analysis (Continued)………….

Exercises

Lesson 13 Producer Behavior: Production Side Analysis Lesson 14 Producer Behavior: Production Side Analysis (Continued)……………... Lesson 15 Producer Behavior: Production Side Analysis (Continued)……………... Lesson 16 Producer Behavior: Cost Analysis………………………..……………... Lesson 17 Revenue and Profit Maximization Analysis……………………………...

Exercises

Lesson 18 Profit Maximization Analysis (Cont) and Market Structures……………. Lesson 19 Market Structures (Continued)…………………….…………………… Lesson 20 Market Structures (Continued)…………………….…………………… Lesson 21 Market Structures (Continued)…………………….…………………… Lesson 22 Market Structures (Continued)…………………….……………………

Exercises

Lesson 23 Market Structures (Cont) and Welfare Economics……………………… Lesson 24 Welfare Economics (Continued)………………………………………..

Exercises

Lesson 25 Introduction To Macroeconomics ……………………………….…….. Lesson 26 Introduction To Macroeconomics (Continued)……………………..….. Lesson 27 Introduction To Macroeconomics (Continued)…………..……………..

Exercises

Lesson 28 Macroeconomic Data and National Income Accounting……………….. Lesson 29 Macroeconomic Data and National Income Accounting (Continued)…...

Lesson 30 Macroeconomic Equilibrium: The Determination of Equilibrium Income…………………………………………………………………

Lesson 31 Macroeconomic Equilibrium: The Determination of Equilibrium Income (Continued)…………………………………………………….

Lesson 32 Macroeconomic Equilibrium: The Determination of Equilibrium Income (Continued)…………………………………………………….

Exercises

Lesson 33

Lesson 34 (Continued)… ………………………………………………………… Lesson 35 (Continued)… …………………………………………………………

Lesson 36 (Continued.)… …………………………………………………………

Lesson 37 (Continued)… …………………………………………………………

Lesson 38 (Continued)… …………………………………………………………

Lesson 39 (Continued)… …………………………………………………………

Lesson 40 Bilateral Relationship among the “Big Four” and Fiscal Policy………….

Exercises

Lesson 41 Fiscal Policy, Money and Banking……………………………………… Lesson 42 Money, Central Banking and Monetary Policy………..………………… Lesson 43 Money and Goods Market Equilibrium: IS-LM Framework………….....

Exercises

Lesson 44 International Trade And Finance…………………….…………………. Lesson 45 Problems of Lower Income Countries (LICs)………………...…………

Exercises

Lesson 1

WHAT IS ECONOMICS?

Economics is not a natural science, i.e. it is not concerned with studying the physical world like chemistry, biology. Social sciences are connected with the study of people in society. It is not possible to conduct laboratory experiments, nor is it possible to fully unravel the process of human decisionmaking. “Economics is the study of how we the people engage ourselves in production, distribution and consumption of goods and services in a society.” The term economics came from the Greek for oikos (house) and nomos (custom or law), hence "rules of the household. Another definition is: “The science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

BRANCHES OF ECONOMICS

Normative economics:

Normative economics is the branch of economics that incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal. Normative economics looks at the desirability of certain aspects of the economy. It underlies expressions of support for particular economic policies. Normative economics is known as statements of opinion which cannot be proved or disproved, and suggests what should be done to solve economic problems, i-e unemployment should be reduced. Normative economics discusses "what ought to be".

Examples:

1-A normative economic theory not only describes how money-supply growth affects inflation, but it also provides instructions that what policy should be followed. 2- A normative economic theory not only describes how interest rate affects inflation but it also provides guidance that what policy should be followed.

Positive economics:

Positive economics, by contrast, is the analysis of facts and behavior in an economy or “the way things are.” Positive statements can be proved or disproved, and which concern how an economy works, i-e unemployment is increasing in our economy. Positive economics is sometimes defined as the economics of "what is"

Examples:

1- A positive economic theory might describe how money-supply growth affects inflation, but it does not provide any instruction on what policy should be followed. 2- A positive economic theory might describe how interest rate affects inflation but it does not provide any guidance on whether what policy should be followed. We the people: includes firms, households and the government. Goods are the things which are produced to be sold. Services involve doing something for the customers but not producing goods.

FACTORS OF PRODUCTION

Factors of production are inputs into the production process. They are the resources needed to produce goods and services. The factors of production are: Land includes the land used for agriculture or industrial purposes as well as natural resources taken from above or below the soil. Capital consists of durable producer goods (machines, plants etc.) that are in turn used for production of other goods. Labor consists of the manpower used in the process of production. Entrepreneurship includes the managerial abilities that a person brings to the organization. Entrepreneurs can be owners or managers of firms.