Introduction to economics

Introduction to economics

1. Introduction

In French, there is one word: "économie" but in English, there are: "economy" and "economics". They have closely 2 different meanings.

Definition: 
Economy: it comes from ancient greeks and means household management. In archaic English, the word economy means the management of household and especially expenses (les dépenses). Today, the term defines the system by which G and S are produced, sold and bought in a country or region. Economy can be defined as being an entire network of produces, distributes and consumers of G and S in a local, regional or national community.

Economics: the study of the economy and the factors affecting the economy are called economics. Economics is the science that deals with the production, distribution and use of G and S. It is important to study how resources can be best distributed to meet the needs of the greatest number of people. There is one main issue there are the unlimited wants. That’s to say the products and services that people want and need VS limited resources.

1. The Scarcity principle

Scarcity is an unescapably fact that our wants typically exceed the means available to satisfy them, scarcity is the reasons why economists exist, without scarcity of time, resources, information’s and consumable, human beings would lack (manqué de) nothing. Scarcity is why you can't have everything even if you are the richest person in the world. Even if money is not scarce, time and/or physical resources will be. So you have to make hard choices about what to produce and to consume.
Economics studies how people make choices and the conditions of scarcity and the result of those choices for society.
Every government, business, and personal decisions equate to deciding how to get the most out of limited resources.

Example: parents with a child in school, they'll prefer small class size rather than an big one. But the fees (les frais) in a small class are higher than in a large one so the parents have to make a choice, regarding to their income. Consequently, scarcity forces us to make trade-offs (compromis) and concessions

1. The cost-benefits principle 

It's the idea that an individual or a firm or a society should take an action and only if, the extra benefits from asking that action are at least as great as the extra costs.

Example : 2 classes of 40 students and 2 sizes of classrooms (40 seat room and 20 seat room) we need to measure costs and benefits : - on the costs side, reducing class size = employ more teachers so the costs per students is higher than in a big class size.
The cost-benefits principle is: will you pay more or not? For an economist the answer is no but for parents, it might be yes, because it depends on the point of view: parent’s wants best education and economists want the service to be worth.

1. Micro economics and macro economics

The discipline of economics can be divided in 2 parts: micro eco and macro eco.

-Micro economics focuses on individual people and individual business in order to understand why they make the economic decisions they do and how these decisions affect the larger economic system. It focuses also on specific industries and markets.
- Macro economic studies the entire economy at a national or global scale. It focuses on large scale decision and issues such as interest rate, inflation, gross domestic product (PIB en France) and unemployment. It also deals with the study of economic growth (croissance eco) and how government use monetary and fiscal policy to try to limit the damage cost by recessions.

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