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Definitions Paper

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Submitted By katmead73
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Definitions Paper
Kathy Meadows
ECO365
February 14, 2013
Tarron Khemraj
Definitions Paper
Economics

What is economics? “Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society” (Colander, page 4). Three main problems that need to be solved in the economy are what and how much to produce, how to actually produce it, and whom is it being produced for. Of course we all want more that can be produced, which causes a scarcity of the products.

Microeconomics

What is microeconomics? “Microeconomics is the study of individual choice, and how that choice is influenced by economic forces (Colander, page 15)”. In other words, it is the study of how companies’ price their merchandise, whether or not I should buy something, what resources are going to be needed. Opportunity cost is associated with microeconomics, and is the benefit that you can get if you choose an alternative. For example, if I spend all my time on homework then I will have less time to watch television. The invisible hand theorem is also associated with microeconomics, through price mechanism. Basically, when quantity supplied or demanded is greater than what is available, the prices will rise or fall.

Law of Supply

What is the law of supply? “The law of supply is based on substitution and the expectation of profits (Colander, page 90)”. Supply is the mirror image of demand, and we need demand in order to have supply. A good example of the law of supply was in the book, but I’ll put it a little differently. Say I am a an accounting assistant and I am supplying my labor to my company, who is in demand for my knowledge. The company provides me with the tools necessary to do my job (computer, printer, etc.) for production, which then supplies our

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