Question

Purpose

To assess your ability to:

identify the key concepts in Economics: scarcity, opportunity cost, comparative advantage, and externalities.

discuss the key concepts in Microeconomics.

distinguish between microeconomic and macroeconomic issues.

describe the difference between positive and normative economics.

Action Items

Write a one page summary that addresses the following:

What is Economics?

Provide an example of scarcity problem that affects an individual consumer.

Which economics principles govern the situation you described?

Post the above introduction to the Class Discussion Board.

Respond to the postings of two of your classmates.

Answer 1

Key concepts of economics:-

# Scarcity- As we know that the resources provided to us not infinite hence scarcity in economics simply means that decisions must be made regularly in order to manage the availability of resorces to meet human needs. Now we know that petroleum is a fossil fuel which is limited in nature hence this limited amount of petroleum represents scarcity.

# Opportunity cost - It simply referes to the cost of the next best alternative forgiven. It simply represents the potential benefits which a individual misses out when choosimng one alternative over other.

# Comparative advantage - It is refered to be as the economy's ability to produce a perticular good at a lower opportunity cost than its competitors. In simple words it is the best we can do while giving up the least.

# Externalities- It can be refered to be as the cost or benefits caused by a producer which in real terms is not received by him. It can be bothe positive and negative.

( Part - B ) Key concepts in microeconomics:-

Microeconomics is that part of economics which studies the decision made by the firms and the households. The kwy concepts which are involved in microeconomics are:-

(a) Marginal utility

(b) Demand and supply

(C) Elsticity od demand and supply

(d) Market structures and market equilibrium

(e) Role of prices and profits in allocation of resorces

( Part - 3 )

Difference between micro and macro economics:-

Microeconomics Macroeconomics

# It studies the individual's # It studies the economy as a whole

behaviour

# It focuses on overcoming issues # It focuses on overcoming the issue

concerning the allocation of like unemployment, inflation.

resorces and price discrimination

# It accounts the demand and supply # It accounts the demand and supply  

of a perticular commodity nation's economy.

#It helps to point how equilibrium can be # It deals with the issue that how to determine

achieved at a small scale levels of employment and income of nation.

( Part-4 ) Difference between positive and normative economics

# Positive economics focuses more on data, facts, and figures rather than personal perspective on the other hand Normative economics focus more on personal perspective and opinions

# Positive economics is Objective and on the other hand Normative economics is subjective.

# Positive economics describe the cause and outcome of relationship among variables on the other hand Normative economics provides value judgement.

# Statements and findings in Positive economics can be tested scientifically on the other hand no data in Normative economics can be tested scientifically.

( Part- 5)

In simple words economics is the social science concerened with the production, distribution and consumption of goods and services. It is simply the study of how an individual makes decision when he has a scarcity of resources. In what way he is going to allocate the resources in order to maximize his satisfaction. It can be broken into two parts:

(a) Microeconomics (b) Macroeconomics

# To know the effect of scarcity on individual consumer, we can take the example of Avian flu, of 2012 which wiped millions of chickens on Mexico creating a scarcity of eggs which is the stable of mexican diet.

# The priciple of economics which comes into play is the scarcity of resorces in the economy. We always have to consider that the resources are scarce and we have to alter our allocation and consumption in such a manner to get maximum out of it.

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