1.3 Scarcity

Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be pursued at the same time; trade-offs are made of one good against others. In an influential 1932 essay, Lionel Robbins defined economics as "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses."[1]

1.4.Microeconomics and Macroeconomics

Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and government decisions. Macroeconomics and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; here is a brief summary of what each covers:

Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity so it could lower prices and better compete in its industry.

Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.

While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.

Questions to Unit 1

1. What is economics?

2. Where did the term come from and what did it mean at first?

3. What does the science use to understand the economic problems?

4. What rules should be followed to make a model of economic behavior?

5. What is the modern definition of economics?

6. What scientists do you know who investigated different aspects of economics?

7. What is scarcity?

8. What is macroeconomics?

9. What aspect does it focuses on?

10. What is microeconomics?

Imagine you are asked to present the main issues of economics to 12-14 year old pupils. They are far away from economics and your words should help them to choose the profession of specialist on finance. What will you tell them about this subject to motive them to start to learn it? Make a presentation showing the most attractive aspects of this science. Work in a group 3-4 students.

UNIT 2 INTRODUCTION TO THE COURSE