Examination terms, definitions, classifications on Economics

1St year students

1. Profession of an economist

• Functions of economists: to collect, process and analyze data to determine costs and benefits of using resources in various ways.

• Types of economists: academic, government, business, entrepreneurs.

2. Degrees in Economics

• Degrees in Economics: Bachelor of Arts (BA), Master’s of Arts( MA), Doctor of Philosophy (PhD), Master of Business Administration (MBA).

• Academic economists engage in teaching, writing and doing research.

• Bachelor of Art (B.A.) or Bachelor of Science (B.S.) is a person who holds a first university degree.

• Business economists work for banks, insurance companies, investment companies, manufacturing firms, economic research firms, and management consulting firms.

• Doctorate is the highest university degree.

• Entrepreneurs operate their own economic businesses.

• Government economists collect and analyze information about economic conditions in the nation and possible changes in government economic policies.

• Tycoon is a person who is successful in business and so has become rich and powerful.

3. Outstanding Economists

• A. Smith “An Inquiry into the nature and causes of the wealth of nations” (1776): founder of economics as a science, introduced the term invisible hand, market is a self-generating system …

• D. Ricardo “Principles of political economy and taxation” (1817): inflation, money, banking, quantity theory of money, monetarism, free trade views, principle of comparative advantage…

• J.M. Keynes “The general theory of employment, interest and money” (1936): studied business cycle, in particular recession and depression, originator of macroeconomics, developed the ideas of fiscal policy….

4. Economics and Economy

• Economics is the study of how individuals and society choose to allocate scarce resources in order to satisfy unlimited wants.

• Economy is a system by which industry, trade and money are organized.

• Scarcity is the condition in which human wants are forever greater than available resources (It is the main problem of economy of any country).

• Individual limited resources: time, money, skill.

• Country limited resources: natural resources, capital, labour force, technology + information.

• Branches of economics: macro- and micro.

• Macroeconomics applies an economy wide perspective that focuses on such issues as inflation, unemployment, and the growth rate of the economy.

• Microeconomics examines individual decision-making units within an economy.

• Needs are basic necessities or requirements.

• Wants are desires for smth.

• Opportunity cost is the value of what is foregone in order to have something else / is the next best alternative which is given up when a decision is made to use limited resources in a particular way.

• Economic goods are things of value that you can see, and show to the others.

• Economic services are intangible things that have value but often cannot be seen, touched, or shown to others.

• Factors of production / productive resources are the basic resources which are needed for the production of economic goods and services.

• Factors of production are divided into four basic categories: (1) natural resources, (2) capital goods, (3) labour and (4) entrepreneurship.

Natural resources are things provided by nature. Land, air, water, forests, coal, iron ore, oil, and other minerals are examples of natural resources.

Capital goods are human-made resources that are used for the production of other goods and services.

Consumer goods are finished products sold to consumers for their own personal use. THEY ARE NOT FACTORS OF PRODUCTION

Labour, sometimes called human resources, is any form of human effort exerted in production.

Entrepreneurship may be defined as the function of combining and organizing natural resources, capital goods, and labour, assuming the risks of business failure, and providing the creativity and managerial skills necessary for production to take place.

• Economic sectors:

Primary sector (extraction and production of raw materials).

Secondary sector (transformation of raw or intermediate materials into goods).

Tertiary sector. (provision of services to consumers and businesses).

Quaternary sector (research and development needed to produce products from natural resources).

v. Economic system

* Economic system can be described as the collection of institutions, laws, activities, controlling values, human incentives that collectively provide a framework for economic decision-making.

* Basic economic questions: what to produce, how to produce, for whom to produce.

* Invisible forces: hand (economic), foot (political), handshake (social).

* Types of economies:

Command economy: basic economic questions are answered by government officials.

Market economy basic economic questions are answered by individual households and businesses through a system of freely operating markets.

Mixed economy a distinction is usually made between the private sector, in which decisions are made primarily by individual households and businesses, and the public sector, in which decisions are made by the government.

Transition economy face the task of moving from a centrally-planned system of resource allocation towards a more market-oriented approach.