This introductory chapter provides a brief distinction between microeconomics and macroeconomics, discusses the basic economic problem of scarcity, explains the different types of economic systems and highlights the significance of the production possibility curve.
It also explains, albeit briefly, several main economic concepts such as marginal cost, marginal benefits, opportunity cost, markets, investment, the price mechanism, economic modelling, the process of induction and deduction, functional relationship and lines and slopes.
After reviewing this chapter and attempting the problems you should be able to:
- Understand the difference between microeconomics and macroeconomics.
- Explain why economics is studied.
- Highlight the different economic systems and explain how they handle the problem of scarcity.
- Demonstrate an understanding of the production possibility curve in a microeconomic and macroeconomic sense.
- Explain the process involved in formulating economic theories.
- Understand the significance of marginal analysis or the logic behind marginal cost and marginal benefits.
- Define the economic concepts discussed in the chapters, such as the concept of opportunity cost, market and investment.
- Explain the meaning of functional relationship and the importance of lines and slopes.
