Economics

- The study how men and society end up

choosing to employ scarce resources that
could have alternative uses (Samuelson)
- The study of how people allocate their
limited resources in an attempt to satisfy
their unlimited wants
- How people make choices
- Study of scarcity and choice, finally helps
how to use scarce or limited resource

Macroeconomics vs. Microeconomics

Macroeconomics
- Studies the functioning of the economy as a
whole
- The study of the behavior of the entire
economy and concerned with the behavior
of the economy as a whole or with the
broad aggregate of economic life such as
national output, income, the overall price
level, unemployment, and foreign trade.
- Examines historical issues as why did
production and prices in some countries
and the rest of the industrial world collapse
during the great depression of the 1930s

Microeconomics
- Analyses the behavior of individual
components like industries, firms, and
households
- Deals with the behavior of individual prices
and quantities (issues at individual level)

Normative vs. Positive Economics

Normative economics
- Involves ethics and value judgments
- Can never be settled by science or by
appeal to facts
- no right or wrong answer to how high
inflation should be
- best resolved by political decision, not by
economic science

Positive economics
- describes the facts and behavior in the
economy
- can be resolved only by reference to facts

Basic concepts of Supply and Demand Analysis

Demand
- need + ability and willingness to pay for a
commodity
- is the amount of good that consumers are
willing to buy at a given price

Desire refers to the peoples willingness
to own a good

Supply
- the amounts of a good producer are willing
and able to sell at a given price

Market
- defined as any set of arrangements which
allows buyers and sellers to communicate
and thus arrange exchange of goods,
services, or resources
- information is a vital ingredient for buyers
and sellers to make rational decisions
- two groups:
Buyers
Sellers

Free Market
- is where such exchange occurs without
interference from the government

Bone Setters (Wogeshas)
- in Ethiopia
- manipulate and massage bones, and
muscles, and ligaments which have been
twisted or strained in some way