Appendix: How to Read and Understand Graphs

A graph is a two-dimensional representation of a set of numbers, or data. A time series graph shows how a single measure or variable changes over time.

Conclusion

Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. The key word in this definition is choose. Economics is a behavioral, or social, science. In large measure, it is the study of how people make choices. The choices that people make, when added up, translate into societal choices.

 

Control questions:

1. What does mean economics?

2. What kind of economic fields do you know?

3. What do you know about normative economics?

4. What kind of economic method do you know?

5. How to read and understand graphs?

 

Literature:

1. English for economists and managers: textbook/ O. V. Ulyanov, S. V. Grishin; yurginskiy technological Institute. – Tomsk: Publishing house of Tomsk Polytechnic University-theta, 2011. – 111 p.

2. Besanko D.A, Brauetugam R.R, Gibbs M.J Microeconomics,2011, Chicago

3. Griffiths A, Wall S.Economics for business and management,2011, England

4. Varian H.R. Intermediate microeconomics,2010, University of California at Berkeley

5. Boyd, W. Harper. Marketing Management.- Boston, 2010

Economic systems

The purpose: Resolve questions about economic system: the what, how, and for whom questions

Key words: economic systems, produced, market economy, centrally planned economy, mixed economy, traditional economy, market economy, production possibilities frontier, law of comparative advantage

Questions:

2.1 Economic Questions and Economic Systems

2.2 Production Possibilities Frontier

2.3 Comparative Advantage

Economic Questions and Economic Systems

Three Economic Questions

All economies must answer these three questions:

1. What goods and services will be produced?

2. How will they be produced?

3. For whom will they be produced?

An economic system is the set of mechanisms and institutions that resolves the what, how, and for whom questions.

Some standards used to distinguish among economic systems are:

„ Who owns the resources?

„ What decision-making process is used to allocate resources and products?

„ What types of incentives guide economic decision makers?

Pure Market Economy

§ All resources are privately owned

§ Coordination of economic activity is based on the prices generated in free, competitive markets

§ Any income derived from selling resources goes exclusively to each resource owner

According to economist Adam Smith (1723–1790), market forces coordinate production as if by an “invisible hand.”

Problems with Pure Market Economies

ü Difficulty enforcing property rights

ü Some people have few resources to sell

ü Some firms try to monopolize markets

ü No public goods

ü Externalities