Introduction to economics · EduSite Academy

▶ Introduction to economics

In this video, we introduce the field of economics using quotes from the person that many consider to be the "father" of economics: Adam Smith. Topics include the definition of economics, microeconomics, and macroeconomics as a field and the role of assumptions in economic decisionmaking.

⏱ 9:59 💾 21.8 MB License: cc-by-nc-sa Streaming via CDN

▶ Scarcity

Learn about the concept of scarcity, a crucial concept in the field of economics. Examine various examples of scarce resources (e.g. caviar, labor, housing) as well as free resources (e.g. air, water in certain contexts) as you learn how economics is a study of how to allocate scarce resources.

⏱ 5:44 💾 11.2 MB License: cc-by-nc-sa Streaming via CDN

▶ Scarcity and rivalry

This video discusses two closely related ideas in economics: scarcity and rivalry.

⏱ 6:31 💾 8.5 MB License: cc-by-nc-sa Streaming via CDN

▶ Four factors of production

This transcript discusses the four factors of production: land, labor, capital, and entrepreneurship. Land refers to natural resources, while labor is the work that goes into production. Capital is the tools and buildings used to produce things, and entrepreneurship is the know-how of putting it all together. The transcript also discusses the distinction between capital goods and consumption goods.

⏱ 6:15 💾 29.9 MB License: cc-by-nc-sa Streaming via CDN

▶ Economic models

Economic models are a way of taking complicated ideas and events and breaking them down into their most important characteristics. We use models in economics so that we can focus our attention on a few things instead of getting bogged down a lot of details. In this video, learn more about the role that models play in economics, and the importance of the assumptions that underlie those models.

⏱ 6:50 💾 8.6 MB License: cc-by-nc-sa Streaming via CDN

▶ Normative and positive statements

What is the difference between normative and positive statements in the context of economics or philosophy? Normative statements are based on opinions or ethics—what someone believes should be. Positive statements, on the other hand, are testable, even if they may not necessarily be true.

⏱ 5:01 💾 5.2 MB License: cc-by-nc-sa Streaming via CDN

📄 Lesson summary: Scarcity, choice, and opportunity costs

Economic resources are scarce. Faced with this scarcity, we must choose how to allocate our resources. Economics is the study of how societies choose to do that. Microeconomics focuses on how individuals, households, and firms make those decisions.

##Key terms

Term | Definition

| - | -
Scarcity | The fact that there is a limited amount of resources to satisfy unlimited wants
Economic resources | Things that are inputs to production of goods and services. There are four economic resources: land, labor, capital, and technology. Technology is sometimes referred to as entrepreneurship.
Land | Natural resources that are used in the production of goods and services. Some examples of land are lumber, raw materials, fish, soil, minerals, and energy resources.
Labor | Work effort used in the production of goods and services. Some examples are the number of workers and number of hours worked.
Capital | Physical goods that are produced and used to produce other goods. Examples of capital would be machinery, technology, and tools such as computers; hammers; factories; robots; trucks, and trains used to transport goods; and other equipment employed in the production of a good or service.
Technology | (sometimes called entrepreneurship) The ability to combine the other productive resources into goods and services.
Occam's razor | the logical principle that states you should make no more assumptions than the minimum amount needed to perform analysis; in economics, we use the concept of Occam's razor when we invoke the ceteris paribus assumption.
ceteris paribus | A Latin phrase essentially meaning "all else equal", which is used in economics to emphasize the idea that the only changes you should be thinking about are the ones that are explicitly described; for example, if we are talking about how someone reacts to a change in the price of a good, you should assume the only thing changing is price and not preferences, income, or anything else.
normative statements | statements that describe opinions or how things ought to be.
positive statements | statements of fact or description of how something actually is.

##Key Takeaways

###Scarcity and Choice

Scarcity is why economics exist: we wouldn't have to worry about how scarce resources are allocated if those resources were unlimited. It should be emphasized that economics is primarily concerned with the scarcity of resources.

###Positive vs. normative analysis

Economic analysis tends to focus mostly on positive analysis, that is, the description of phenomena, facts, and concepts. It can be tempting to analyze things using normative analysis, that is, describing things as they ought to be.

However, you shouldn't interpret that to mean that normative thinking is completely absent in economics and especially in policy-making: both are important for well-formed policy.

###Economic models

A model is a simplification of a concept or process that is used to better understand that process by cutting away as much as possible to focus on key aspects. For example, a map is a model of how roads are laid out and where they intersect. Maybe there is other useful or interesting information, like the location of an interesting mural or the world's best taco stand, but if we are just interested in getting to the store, we don't need that, we just need to know how to get there.

Economists rely on models because it's impossible to capture the full complexity of human interaction, let alone try to do it in a straightforward and easy to read way!

##Common errors

Not all costs are monetary costs. Opportunity costs are usually expressed in terms of how much of another good, service, or activity must be given up in order to pursue or produce another activity or good.
You might hear the fourth economic resource referred to as either entrepreneurship or technology. The terms are used interchangeably but mean the same thing: the ability to make things happen. Take the example of computers—a computer itself would be considered a good, but our ability to make computers would be considered technology.
The word capital is used in everyday language to mean what economists would call financial capital. If you see the word capital on its own in an economics context, it refers to physical capital—equipment, machinery, or tools used to produce goods and services. Physical capital is tangible, but financial capital isn't always so.