ECONOMICS CHAPTER 1
● Economics - a social science collaborating with other social sciences (political
science, sociology, mathematics, psychology) describing the utilization of limited
resources and services and their distribution among individuals and groups.
● Economy - is the state of the economy. It is a collection of economic activities taking
place in a specific territory. It involves the management of a particular entity,
individual, group, or state.
Microeconomics:
● Deals with the behavior of individual economic entities (individuals, companies).
● Individuals demand products and simultaneously offer production factors (capital,
labor), supply, demand.
● Companies, based on demand, create products through production factors.
● The state creates conditions for the functioning of the economic system.
● Examines, for example, the relative prices of goods, the impact of taxes on
businesses.
Macroeconomics:
● Deals with the state of the entire national economy.
● Examines macroeconomic indicators (=macroeconomic aggregates=peaks of the
pentagon) captured in the magical pentagon - GDP, unemployment, inflation, state
budget, export/import (balance of international trade).
Economic Policy of the State
All developed economic states have:
a) Public sector - public institutions, ministries, offices, trade offices, courts, funded by the
state from the state budget.
b) Private sector - self-employed individuals, business sector, not funded from the state
budget.
State = an institution with the power to govern, judge, create laws, etc. It has its territory,
population, and the ability to enter international organizations.
How does the private sector influence the public sector?
● Private sector produces; the public sector buys.
● Private sector pays taxes into the state budget; when it thrives, the economic
performance and GDP grow.
How does the public sector influence the private sector?
● Through legislation, rules, laws, etc.
Economic Freedom Index
● Economics - a social science collaborating with other social sciences (political
science, sociology, mathematics, psychology) describing the utilization of limited
resources and services and their distribution among individuals and groups.
● Economy - is the state of the economy. It is a collection of economic activities taking
place in a specific territory. It involves the management of a particular entity,
individual, group, or state.
Microeconomics:
● Deals with the behavior of individual economic entities (individuals, companies).
● Individuals demand products and simultaneously offer production factors (capital,
labor), supply, demand.
● Companies, based on demand, create products through production factors.
● The state creates conditions for the functioning of the economic system.
● Examines, for example, the relative prices of goods, the impact of taxes on
businesses.
Macroeconomics:
● Deals with the state of the entire national economy.
● Examines macroeconomic indicators (=macroeconomic aggregates=peaks of the
pentagon) captured in the magical pentagon - GDP, unemployment, inflation, state
budget, export/import (balance of international trade).
Economic Policy of the State
All developed economic states have:
a) Public sector - public institutions, ministries, offices, trade offices, courts, funded by the
state from the state budget.
b) Private sector - self-employed individuals, business sector, not funded from the state
budget.
State = an institution with the power to govern, judge, create laws, etc. It has its territory,
population, and the ability to enter international organizations.
How does the private sector influence the public sector?
● Private sector produces; the public sector buys.
● Private sector pays taxes into the state budget; when it thrives, the economic
performance and GDP grow.
How does the public sector influence the private sector?
● Through legislation, rules, laws, etc.
Economic Freedom Index
