College of Business Administration
Assignment #1
ECON 1311-103
Introduction to Macroeconomics
Name: AMEEN ALNASEER
ID: 201100306
CHAPTER 1
Fundamental Concept :
Scarcity: is that economic resources in fact are limited in the short run. On the other side
the human wants are unlimited. Because of scarcity, the economists have to study how to
use efficiently those resources to fulfill those unlimited needs.
Efficiency: means society gets the most it can from its scarce resources.
-Technical efficiency
-Economic efficiency
Free good vs. economic good:
Macroeconomics: looks at the economy as a whole. It examines a wide variety of areas, such
as how total investment and consumption are determined, how Central Banks manage
money supply and interest rates, what causes financial crises & why some nations grow
rapidly while others stagnate?
Microeconomics: focuses on the individual parts of the economy. It concerned with the
behaviour of individual entities such as markets, firms and households.
Normative economics: It involves value judgements.
It deals with questions such as:
Should unemployment be raised to ensure that price inflation does not become too rapid?
Should the United States break up Microsoft because it has violated the antitrust laws?
positive economics: It describes the facts of economy as it is.
It deals with questions such as:
Why do doctors earn more than dentists?
Does free trade raise or lower the wages of most Americans?
Fallacy of composition: occurs when you are assuming what is true for the part is also true
for the whole.
post hoc fallacy: occurs when we assume that, because one event occurred before
another event, the first event caused the second.
Keep other things constant: To isolate the effect of interest, economists use the logical
device called ceteris paribus or “other things being equal.
Key Problems of Economic Organization
What, how, and for whom alternative economic systems:
Command: Central decisions in production & consumption.
Market: a group of buyers and sellers of a particular good or service.
Laissez-faire: A person may be in a leadership position without providing leadership, leaving
the group to fend .
Mixed economies: Mixed economy is an economic system in which both the state and
private sector direct the economy, reflecting characteristics of both market economies and
planned economies.[1] Most mixed economies can be described as market economies with
strong regulatory oversight, and many mixed economies feature a variety of governmentrun enterprises or government provision of public goods.
Choice Among Production Possibilities
Inputs: or factors of production: are goods and services that are used to produce goods and
services.
Outputs: the various useful goods or services that result from the production process and
are either consumed or employed in further production.
Production- possibility frontier (PPF):
the economy produces only two goods, guns and butter.
The technology and resources are hold constant.
Productive efficiency: occurs when the economy is utilizing all of its resources efficiently.
The concept is illustrated on a production possibility frontier (PPF) where all points on the
curve are points of maximum productive efficiency (i.e., no more output can be achieved
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from the given inputs).[1] An equilibrium may be productively efficient without being
allocatively efficient i.e. it may result in a distribution of goods where social welfare is not
maximized.
opportunity cost: is what you give up to obtain some other item.
For example: University study vs. Work
Or leisure time vs. Work time
Using your land for your firm vs. Renting that piece of land.
Using resources for producing food vs. Production of guns.
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Chapter 2
The Market Mechanism
Market: is a mechanism through which buyers and sellers interact to determine prices and
exchange goods, services and assets.
market mechanism: is a term from economics referring to the use of money exchanged by
buyers and sellers with an open and understood system of value and time trade offs to
produce the best distribution of goods and services.
Markets for goods and for factors of production: In economics , factors of production are
the inputs to the production process. (the ability to work), and capital goods applied to
production.
Prices as signal: is a message sent to consumers and producers in the form of a price...
Alternative theories include that prices reflect ...
Market equilibrium: In economics, economic equilibrium is a state of the world where
economic forces are balanced and in the absence of external influences the (equilibrium)
values of economic variables will not change
Perfect: perfect market is defined by ... collectively called perfect competition . ... estate
market is an example of a very imperfect market. ...
Imperfect competition: is the competitive situation in any market where the conditions
necessary for perfect competition are not satisfied
In economic theory , imperfect competition is the competitive situation in any market where
the conditions necessary for perfect competition ...
Adam smith's invisible-hand doctrine: Invisible hand(section Abusing Smith's statement of
an invisible hand)
Feature of Modern Economy
specialization: the separation of tasks within a system.
division of labor money: wage labor and capital accumulation There are multiple variants of
capitalism.
Factor of production: are the inputs to the production process. Finished goods are the
output.
Land: a factor of production comprising all naturally occurring resources
Labor: that group of people who are either employed or unemployed
Capital: Capital: In economics , capital, capital goods, or real capital are those alreadyproduced durable goods that are used in production of goods
Private property: Private property is the employment , control, ownership, ability to
dispose of, and bequeath land , capital.
Property rights: that resource is owned by government, collective bodies, or by individuals
Property rights can be viewed as an attribute of an economic good.
Government's Economic Role
Efficiency: In economics , the term economic efficiency refers to the use of resources so as
to maximize the production of goods and services.
Equity: Equity or Economic equality, is the concept or idea of fairness in economics ,
particularly in regard to taxation or welfare economics.
Stability inefficiencies: markets is that inefficiency.
Monopoly: In economics , a government-granted monopoly (also called a "de jure
monopoly") is a form of coercive monopoly.
Externalities: In economics , an externality, or transaction spillover, is a cost or benefit that .
In the case of both negative and positive externalities.
Inequity of incomes under markets macroeconomic policies: Identity economics captures
the idea that we make economic choices based on both monetary incentives and our
identity: holding monetary.
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Fiscal: In economics , the fiscal burden of government imposed onto its taxpayer s is the
influence of the tax levied on the purchasing power.
Monetary policies stabilization: Monetary policy is the process by which the monetary
authority of a country ... These policies often abdicate monetary policy to the foreign .
Growth: Economic growth is the increase in the amount of the goods and services produced.
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CHAPTER 3
supply and demand analysis: Supply and demand is an economic model of price
determination in a market.
demand schedule or curve: Supply and demand is an economic model of price
determination in a market . ... Thus in the graph of the demand curve, individuals'
demand
law of downward-sloping demand: In law, a monopoly is a business entity that has
significant market ... that the monopoly has a downward-sloping demand curve
rather than the "
influences affecting demand curve: In economics , the demand curve is the graph
depicting the relationship between ... Factors affecting market demand : of
individual demand curves.
supply schedule or curve: In economics , supply is the amount of some product
producers are willing and able . Usually, supply is plotted as a supply curve showing.
influences affecting supply curve: Supply and demand is an economic model of price
determination in a market . ... Thus in the graph of the supply curve.
equilibrium price and quantity: current price will equal the quantity supplied by
producers (at current price), resulting in an economic equilibrium of price and
quantity.
shift of supply and demand curve: Supply and demand is an economic model of
price determination in a market.
all other things held constant rationing by price: Supply and demand is an economic
model of price determination in a market. the prices of all other products being held
fixed.
CHAPTER 4
Elasticity concept
price elasticity of demand, supply: Frequently used elasticities include price
elasticity of demand , price elasticity of supply , income elasticity of demand
elastic: the responsiveness of demand or supply.
Inelastic: Does not respond to demand and supply.
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Unut-elastic demand: Frequently used elasticities include price elasticity of demand ,
... and one demand is inelastic and if it equals one, demand is unit-elastic.
determinant of elasticity: Price elasticity of demand (PED or E d) is a measure used
in economics to show the ... constant all the other determinants of demand, such as
income).
total revenue: is the total receipts of a firm from the sale of any given quantity of a
product.
relationship of elasticity and revenue change: In microeconomics , marginal
revenue (R') is the additional revenue that will be ... Relationship between marginal
revenue and elasticity.
Application of supply and demand
Incidence of a tax: In economics , tax incidence is the analysis of the effect of a
particular tax on the distribution of economic welfare .
distortions from price controls: In economics , inflation is a rise in the general level
of prices of goods and ... Wage and price controls: controls make ... kinds of
distortions.
rationing by price vs: policy, rationing, a shortage of doctors and nurses,
intervention vs. ... Rationing by price means accepting that there is no triage
according.
rationing by the queue: Governments became involved with new issues such as
rationing, ... Food shortages: The queues lengthened in front of shops.
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