Fundamentals of economic theory

1.

MODULE 1: FUNDAMENTALS OF
ECONOMIC THEORY
1. ECONOMY AND ITS ROLE IN
SOCIETY

2.

LESSON PLAN
1. What is economics?
2. Why do we need a lesson in economics?
3. What is macroeconomics and microeconomics?
4. Questions
5. Terms with meaning

3.

WHAT IS ECONOMICS?
Economics is a set of sciences about economic management, a type of social science that
studies the relationship of people in the process of production, consumption, distribution and
exchange of goods or services. Translated from Greek "eco" means economy, "nom" - law.
Economics is a science primarily about the relationship between people who need to make
decisions in conditions of limited resources. The concept of "resources" includes not only
money, it is also time spent on certain tasks, intellectual capital (human knowledge and their
value).

4.

There are many definitions of economics, one of them says: Economics is
the science of limitation and choice. Since the limitless needs of all
people cannot be satisfied, everyone — a person, a company or a state must make their own choice. Individuals and families must decide how to
use their limited income, savings and other resources. Similarly,
businesses are limited by their income, savings and creditworthiness. The
state is also limited in its ability to collect taxes, receive loans and print
money.

5.

KEY ECONOMIC ISSUES:
What to produce?
• Since limited resources cannot produce whatever one wants, it is necessary to
decide which of the mutually exclusive goods and services should be produced
and in what quantity.
How to produce?
• It is important to determine what technologies and resources will be used in
production.
For whom to
produce?
• Since there are not enough goods for everyone, a distribution mechanism is
needed.
The basis of the economy is the production of goods. Without production there can be no trade, no exchange, no
consumption.

6.

MICROECONOMICS
This is the science of consumers (households) and producers,
about individual sectors of the economy.
There are two entities: a firm and a household.
Examines the issues of the microeconomic level: the consumer's
choice of products, the company's business plan, family budget
planning - cause-effect and functional relationships that affect
economic decision-making by both individuals and firms.

7.

MACROECONOMICS
This is the science of the economy as a whole, the economy of
the state and even the world economy.
There are three entities: the firm, the household and the state.
Examines the issues of the macroeconomic level: economic
growth rates, GDP indicators, changes in the welfare of the
population, inflation rate, unemployment rate, etc— - what
characterizes national and international economic phenomena.

8.

PRODUCTION AND FACTORS
Production is the process of creating material goods, the transformation of the
substance of nature into goods necessary for people.
Factors of production are the resources needed to conduct the production
process. There are the following factors, or resources, of production:
human
resources
natural
resources
capital
entrepreneurship

9.

Two students together choose a country and
tell about the economic situation of this
country