Introduction to economics: What is it?
Before we dive into the principles of microeconomics, we need to define some of the major ideas that lie at the heart of economics. What, for example, is the economic way of thinking? What do economists mean when they throw around terms like market structure and the invisible hand?
Here you will learn to identify and define these terms before addressing the driving principle behind microeconomics: the idea that individuals and firms (economic agents) make rational choices based on self-interest. These decisions are necessary, because all resources are scarce. In other words, no good or item is infinitely available.
You will also be introduced to a number of economic models, the assumptions and constraints associated with each, and the ways they help us better understand real-life situations.
Upon successful completion, you will be able to:
- explain the economic way of thinking;
- identify how individual economic agents make rational choices given scarce resources, and explain how to optimize the use of resources at hand;
- apply the concept of marginal analysis in order to make optimal choices, and identify whether the choices are efficient or equitable; and
- apply basic economic models related to production, trade, and the circular flow of resources.