Introduction to Economics-Engineering Economics-Lecture Slides, Slides of Microeconomics

Download Introduction to Economics-Engineering Economics-Lecture Slides and more Slides Microeconomics in PDF only on Docsity!

Copyright © 2004 South-Western/Thomson Learning

Introduction^1

docsity.com

Some Economic Terms

• Every field of study has its own terminologies
  • Mathematics
    • Derivatives, Integrals, Algebra, Matrices etc.
  • Economics
    • Demand, Supply, Consumption, Production, Elasticity etc.

docsity.com

Microeconomics and Macroeconomics

• Microeconomics focuses on the individual parts of the economy. - How households and firms make decisions and how they interact in specific markets
• Macroeconomics looks at the economy as a whole. - Economy-wide phenomena, including inflation, unemployment, and economic growth

docsity.com

Economic Systems

• Command or planned economy:
• A command or planned economy is a mode of economic organization in which the key economic functions – for whom, what, how to produce are principally determined by government directive.
• In the past we have seen this system in Russia and China.

docsity.com

Economic Systems

• Islamic economic system:
• The economic system based on the teachings of Islam. This system is based on Islamic values and Islamic rules i-e zakat, ushr, etc. Islam forbids both the taking and giving of interest.
• Ushr is zakat on agricultural production(one- tenth).
• The Islamic economic system ensures the greater circulation of money. docsity.com

Economic Systems

• In the field of consumption certain items of food are unlawful such as dead animals, blood, swine flesh and animals slaughtered in the name other than that of Allah.

docsity.com

Economic Models

• Economists use models to simplify reality in order to improve our understanding of the world
• Two of the most basic economic models include: - The Circular Flow Diagram - The Production Possibilities Frontier

docsity.com

Our First Model: The Circular-Flow Diagram

• The circular-flow diagram is a visual model of the economy that shows how dollars flow through markets among households and firms.

docsity.com

Flow in an Economy

• The flow of goods, services are shown in circular flow diagram.
• The Households and Firms are two major entities.
• Firms use various economic resources like land, labor and capital, which are provided by households.
• Firms make payment of money to the households for receiving various resources.
• The HH in turn make payments of money to business organizations for receiving consumer goods and services.
• These two entities show interdependence between themselves in a simple economy.

docsity.com

Our First Model: The Circular-Flow Diagram

• Firms
  • Produce and sell goods and services
  • Hire and use factors of production
• Households
  • Buy and consume goods and services
  • Own and sell factors of production

docsity.com

Our First Model: The Circular-Flow Diagram

• Factors of Production
  • Inputs used to produce goods and services
  • Land, labor, and capital
• Market is a geographically defined area where buyers and sellers interact to determine the price of a product or a set of products.

docsity.com

• Land: includes the land used for agriculture or industrial purposes. Further all natural materials such as: water, air, minerals, sunshine, plant and tree growth, as well as the land itself which is applied to the production process.
• Labor: Any mental or physical work done for the sake of reward. The efforts, skills, and knowledge of people which are applied to the production process. (Human capital)
• Capital: Real Capital (Physical Capital )
  • Tools, buildings, machinery -- things which have been produced and used in further production
• Financial Capital: Assets and money which are used in the production process

Economics

docsity.com

Figure 2 The Production Possibilities Frontier

Copyright©2003 Southwestern/Thomson Learning

Production possibilities frontier

A

B

C

Quantity of Cars Produced

2,

600

1,

0 300 700

2,

3,

1,

Quantity of Computers Produced

D

docsity.com

PPF

• If all the resources are used for the production of cars, then the economy would produce 1000 cars and no computers.
• If all the resources are used for the production of computers, then the economy would produce 3000 computers and no cars.

docsity.com