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Class : AY
Yoss Naga Saputra / 125110002Sunarto Dharmawan / 125110003Fenny Fong / 125110007Gracia Amanda / 125110009
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ECONOMICS?
Social
Science
Studies ofChoices
The Use ofScarce
Resources
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Economics is the social science thatstudies the choices that individuals,
businesses, governments, and entiresocieties make as they cope withscarcity and the incentives that
influence and reconcile thosechoices.
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The questions economics asks andattempts to answer fall into twocategories.
1. Positive economics economic realitythat can be supported or rejected byreference to the facts. They might beright or wrong. It is used to understandthe behavior and operation of economicsystems.
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Positive
Economics
Descriptive
economics Economic
theory Empirical
economics
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2. Normative economics reflectsopinions and values, judging whetherthe outcomes are good or bad. Itdescribes what exists and how it works.
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Simply speaking, positive economics dealwith what is while normative economics isconcerned with what should be.
Economics Not so normative as arts nor sopositive as science
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Scope of Economics
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Microeconomics studies behaviors ofindividual decision makers in a particularmarket and their interrelationships.
Microeconomics examines the factors ofindividual economic choices and how thosechoices are coordinated by markets.Ex. : How price and quantity supplied for acertain product interact, determine each otherand finally come to equilibrium.
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Macroeconomics is the overall behavior andperformance of an entire economy. Whathappens in an economy is the outcome of
millions of individual decisions, andmacroeconomics puts all the small pieces thatare subjects of microeconomics together tofocus on the big picture, as at a national or aglobal level.
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Examples of Microeconomic and Macroeconomic ConcernsProduction Prices Income Employment
Micro-economics
Output inIndividual
IndustriesandBusinesses
Price ofIndividual
Goods andServices
Distributionof Income
and Wealth
Employment byIndividual
Businesses &Industries
Macro-economics
NationalProduction / Output
AggregatePrice Level
NationalIncome
Employment andUnemploymentin the Economy
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Rational Self-Interest
Opportunity CostMarginal Analysis & Sunk CostEfficient Market
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Rational self-interest means that in acondition, individuals try to minimizethe expected cost for a benefit or
maximize the expected benefit with acost.In economics, those rational choices
realized by tradeoffs.
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Tradeoff is an exchange giving up onething to get something else.This is an economic way of thinking because we choose among the availablealternatives.
What How For Whom
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The highest valued alternative of theactivity that we give up to get the otherthing.These costs are noncash or implicit andsometimes cant be measured by money. Opportunity cost is subjective . Only thechooser can determine the mostattractive alternative for itself from itsspecial point of view.
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Marginal cost is the cost of an increase in anactivity (additional cost).
The benefit that arises from an increase in theactivity is called marginal benefit.By evaluating marginal benefits and marginalcosts and choosing only the action that bring greater benefit than cost, we use our scarceresources in the way that makes us as well offas possible.
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Decreasing Marginal Benefit
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In marginal analysis, one of the concepts thatcannot be missed out is sunk cost.Sunk costs are costs that cannot be avoidedfor any nonzero units of products and that donot change regardless of the quantity ofproduction.
As opposed to sunk cost, marginal cost is thecost that is relevant to the quantity producedand that do not occur with a zero production.
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Efficient market implies unequal costsor profits associated with alternativesare eliminated as people respond toincentives (e.g. profit, risk, time savings,price, money, etc.)Profit opportunities are rare because, atany one time, there are many peoplesearching for them.
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EconomicPolicy
Efficiency
Equity
Stability
Grow
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Variable A measurethat can
change from
time to time.
Model Formal
statement of
a theory.Models aredescriptions
of the
relationshipbetween twoor more
variables.
Theory
Generalstatementof cause
and effect,
action andreaction.
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Part of the process of abstraction used to focusonly on key point.
Ceteris Paribus
Falsely assuming a first event caused secondevent.
Post Hoc Fallacy
What is good for one is not necessarily good forall.
Fallacy of Composition
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Parkin, Michael and friends. 2007. Economics: 5th Edition . Australia. Publisher : Pearson EducationAustralia.Case, Karl; Fair, Ray. 2002. Principles of Economics:6th Edition . Publisher : Prentice Hall BusinessPublishing. Purpose And Scope Of Economics . Cited: August 29,2011. Available from:http://www.oldandsold.com/articles10/economics-1.shtmlScope of Economics . Last update: 2011. Cited:August 29, 2011. Available from:http://economicsconcepts.com/scope_of_economics.
htm
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