Economics Definition:
The study of making decisions
Macroeconomics
Nation level
Microeconomics:
Firm level:
To maximize the profit:
Maximizing quality + minimizing cost
Profit = Revenue - Cost
Revenue = Total earnings of sales
## Case study: Studying at GUST ### Explicit Cost: 5 course fees = 5 * 700 KWD = 3500 KWD Textbooks = 5 * 30 KWD = 150 KWD Food / Drinks = 30 KWD * **15 Weeks** = 450 KWD Transportation = 10 KWD * 15 weeks = 150 KWD **Total cost** = 4250 KWD ### Implicit Costs: **Wage foregone:** 10 KWD (only Bill Gates holds so much value w/o a degree) * 5 hours * days * 15 weeks = 3750 KWD
Total Economic Cost = Explicit + Implicit Cost
8000 KWD
Accounting Cost != Economic Cost!! (Accounting Cost does not include implicit cost)
(Will be in test for sure)
## Normative vs. Positive: __Positive:__ a statement that can be fact-checked (verifiable) __Normative:__ an opinion that can't be fact-checked
Trade-off
To get one thing, you have to give up another due to scarcity of resources.
Scarcity: Economics is based on the assumption of limited resources.
Opportunity Cost
Highest-valued alternaitve
Ex: if you pick a business that gives 100k over one that gives 90k and another that gives 80k, the 90k business would be the opportunity cost.
Opportunity cost cannot be more than one option
Components of production:
Labor
No. of workers
Capital
No. of machines
Entrepreneurs
The person who starts up a business and takes the risk to hopefully get profit
Natural Resources
Renewables
Solar energy, wind energy, etc…
Non-renewables
Oil, gas, etc…