Fundamental of Economics.pptx

7/29/2019 Fundamental of Economics.pptx

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Raya Anwari



Fundamental of Economics Studies how the prices of labor, capital and land are set in the economy,

and how those prices are used to allocate resources. Explore the behavior of markets of the financial markets, and analyze

how they allocate capital to the rest of economy

Examine the distribution of income, and suggest way that the poor canbe helped without harming the performance of the economy Looks at the impact of the government spending, taxes, and budget

deficits on growth. Studies the swings in the unemployment and production that make up

the business cycle, and develops government policies for improving

economics growth Examine the patterns of trade among the nations, and analyze the

impact of trade barriers Looks at growth in developing countries, and proposes ways to

encourage the efficient use of resources.



Fundamental of Economics Economics is the study of how societies use scarce resources to

produce valuable commodities and distribute them amongdifferent people.

Economic goods : goods that are scarce or limited in supply. Micro-Economics : concern with the behavior of individual

entities such as markets, firms, and households. (Adam Smith - Wealth of Nation)

Macro-economics : overall performance of economy. (John

Maynard Keynes - 1935) Logic of Economics :

Post hoc fallacy

Failure to hold other things constant

Fallacy of composition



Fundamental of Economics 3 Problem of economic organization

1. What commodities are produced?2. How are goods produced?3. For Whom are the good produced?• Positive economics : deals with equation that all can be resolved by

references to analysis and empirical evidence.• Normative economics : involves ethics precept and norms of fairness.

Market, Command and Mixed Economics Alternative economics system : Market economics: is one which individuals and private firms make

major decisions about production and consumption. Command economics : is one which the government makes all

important decisions about production and distribution. Mixed economics : combination of market and command economics.



Society’s Technological Possibilities Inputs are commodities or services that are used to

produce goods and services.

Factor of Production :

Land : Natural resources

Labor : Human resources

Capital :

Outputs are the various useful goods or services thatresult from the production process and are eitherconsumed or employed in further production.



Society’s Technological Possibilities Production-Possibility Frontier



Shifting Boundary Between

Markets & Government Market is mechanism by which buyers and sellers meet to trade and to

determine prices and quantities for commodities. Market equilibriums : represents a balance among all the different

buyers and sellers.

Invisible Hand : in selfishly pursuing only his/her personal good,every individual is led, as if by invisible hand, to achieve the best goodfor all.

Failure of invisible hand : by market failure Monopolies Imperfect competition

Advanced economy : Trade Specialization Money Capital



Shifting Boundary Between

Markets & Government Economic role of government

Increase efficiency by promoting competition, curbingexternalities, and providing public goods.

Perfect competition : all goods and services have a price andare traded in markets.

Imperfect competition : monopoly

Promotes equity by using tax and expenditure

programs to redistribute income. Foster macroeconomic stability and growth by fiscal

policy and monetary regulation.



Basic Elements of Supply and

Demand Faktor yang mempengaruhikurva demand :1. Average Income2. Population3. Prices of related goods4. Tastes

5. Special influences

Faktor yang mempengaruhikurva supply :1. Technology 2. Input Prices3. Prices of related goods4. Government Policy 5. Special influences

Quantity of supplied

P r i c e

P r i c e

Quantity of demanded

Fundamental of Economics.pptx

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