gpe basic economic concepts

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1、IntroductionScarcity:Ifwecouldallhaveourwantssatisfied,therewouldbenoneedforproductionordistribution.Moneywouldbeirrelevant.Unfortunatelytheworldisnotlikethat.Whatiseconomics?Economicsisthestudyofhowpeopleandsocietieschoosetoemployscarceresourceswhichhavealternativeusestoproducegoodsandserv

2、ices,andhowtodistributethem.Byresources,economistsmeanland,laborandcapital,suchasmachinesandrawmaterials,whichcanbeusedinproduction.Theyarealsocalledfactorsofproduction.Resourcesareusedtoproduceeverythingfromapplestozoos,anditisbecauseresourcesarescarcerelativetowantsthattheeconomicproblema

3、rises.ThreebasiceconomicproblemsEverysocietyhastofacethreebasiceconomicproblemssincewecannotproduceeverythingthateveryonewouldlike:1.Whatwouldweproduce?(Theallocationproblem)2.Whatmethodsshouldbeusedtoproducethesegoodsandservices?(Theproductionproblem)3.Whoshouldreceivethegoodsandservicesth

4、atareproduced?(Thedistributionproblem)Micro-economics:thestudyofeconomicactivitiesofindividualinstitutionssuchasfirms(pricedetermination;businessstructure;economiesofscale;competitionandmonopoly;cost-benefitanalysis;factorsofproductionandtheirrewards,etc.)Macro-economics:thestudyoftheeconom

5、yasawhole(problemslikeinflation,unemployment,taxationandgovernmentspending,balanceofpayments,nationalincomeandwelfare,theredistributionofincomeandwealth,etc.)Howshouldaneconomybeevaluated?A.economicgrowthB.levelsofunemploymentC.inflationD.fairdistributionofincome(GiniCoefficient)E.balanceof

6、paymentsFirstPrinciples:Theopportunitycost:theopportunitycostofanyactionisthevalueoftheforgonealternativeaction.Choosingonealternativemeansthatotheralternativeshavetobegivenup.Therefore,therealcostofanactionisthevalueofthemostattractivealternative.Marginalanalysisistheanalysisoftherelations

7、betweenincrementsordecrementsofthetotalquantityofsomeeconomicvariable.Efficiencymeansthatitisnotpossibletomaintainthepresentlevelofoutputwithlessinput,orthatitisimpossibletogetmoreoutputofagoodfromgiveninputs.ThreeSchoolsofthoughtThesupplyside/free-marke