ECS2601-Microeconomics-Notes

The word economy comes from a Greek word for “one who manages a household. Definition of Economics: the study of how society manages its scares resources. How do we go from managing a household to managing an economy? - A household and an economy face many decisions: o Who will work? o What goods and many of them should be produced? o What resources should be used in production? o At what price should the goods be sold? Society and scare resources: The management of society’s resources is important because resources are scare. Scarcity: means that society has limited resources and therefore cannot produce all the goods and services people with to have. Decision-making is at the heart of economics. The individual must decide how much to save for retirement, how much to spend on different good and services, how many hours a week to work. The firm must decide how much to produce, what kind of labour to hire. Society as a whole must decide how much to send on national defence versus how much to spend on consumer goods