I will give you an economic primer
I was an Econ Major, but Economics has been my pet subject for a long time, since early high school.
Economics is the study of the scarcity of wealth and resources, how to distribute those resources, how to decide who gets how much, and to discover the behavior of institutions as they influence the economy and how the economy influences the institutions.
Maco economics starts off looking at the entirety of the economy, such as money supply, GDP, unemployment, interest rates, and works its way down to the individual firm.
Micro Economics starts off analyzing the behavior of small firms, it discovers how they make decisoins, their profit motive, their hiring behavior, their pricing policies and works its way upward to the entire economy.
Normative Vs. Positive Economics. Normative economics is a value judgement assessment of how one beliefs the economy should operate. Normative economics gives qualitative responses. Positive economics is concerned with purely describing how it works regardless of the emotional, social, or controversial aspects of the statistical information. A newspaper article about unemployment being too high would normative. An economist explaining what caused high unemployment would be positive economics. Sociologists are characterized as being normative economists.
Oppurtunity Cost: In any economy the cost of doing one thing is the cost of all other things forgone in its place. The real cost of doing A is that B C and D cannot also be done. The cost of making computers is that the same firm cannot now make tuperware. In government Oppurtunity Cost is the entire argument. The cost of giving 1 billion to the poor is that the 1 billion must be neglected from the middle class and the wealthy. The cost of giving to the poor is the anger experienced by the middle class and the wealthy, if there is any anger at all. Of course to find out if they are angry, that would be a subject for normative economists to discover.
The Production Possibilities Curve: In any society there is a curve of finality which cannot be exceeded. In our society our production potential for computer hardware and software is very high, whereas in Mexico is it is much lower. Yet our production possibilty for agriculture is also much higher than Mexico's. The Production Possibilites Curve is a set of all combinations of high tech and low tech industries and how much they can produce. The entire Ameican curve exceeds the entire Mexican curve. Yet Cubas curve for high quality cigars exceeds Mexicos, thus at this point Cuba finds an advantage. Economics is keenly interested in deciding what is the greatest point on the curve between low tech and high tech industries. A simple question is to ask, should more farmers become computer scientists, or should more computer scientists become farmers. The production possibilities curve attempts the GDP outcome of different combinations and then tries to encourage which point will produce the greatest GDP outcome. Thus, in our current economy it seems that farmers would be better off becoming computer scientists. The Curve is usually umbrella shaped, which insinuates that some middle position is usually the most advantageous.
The Law of Diminishing Returns
The law of diminishing returns is a universal principle that applies to all things. The law is that inputs are increased at some point more input is not beneficial but actually becomes detrimental. The flower pot example is the most classic example. Normally about a dozen seeds in one flower pot should produce the optimum amount of healthy flowers, yet two dozen may produce more flowers but they may be less healthy, whereas six dozen seeds in one flower pot would yield only one or two sickly flowers because the seeds themselves are acting as a deterent. The law of diminishing returns is interested at find what point is more not more and at what point does more actually begin to produce less
Indifference Curves A very interesting situation in an economy is the moment when a certain amount of something is equally as valuable to something else. This is the true price of something. For example how many beds would someone trade for a car. The point of indifference equates the price of both the car and the beds. If one would trade six beds for a new car, the car then is worth six beds and the bed is worth one sixth of a car, regardless of the price of the items. The indifference curve shows at what point the person would accept either/or the car or the beds. This experiment applied over a survey of many people reveals a moment of absolute valuation. This was done with rats in cages. Tasts cola was put in one bottle with a lever, and plain water was put in another bottle with a lever. The rats were allowed to pull each lever to get the drink of there choice. Yet as the rats began to choose the cola over the water, the amount of pulls of levers was gradually increased until the rats gave up and did want to have to pull the level thirty times to get a little bit of cola. So the moment of indifference was 29 pulls of the level for cola being equal to one pull of the level to get water. The moment of indifference comes when it seems that the rat could go either way, 29 pulls for soda, or 1 pull for water. The value of realizing the moment of indifference is to see just how far inflation of one set of prices can go before the buyers just stop and choose something less expensive. Sometimes indifference curves run in combinations, such as which would you rather have: 1 apple and 2 bannanas or 2 bannanas and 1 apple. Under this method the individual can assess what is the true value of each the banana and the apple in terms of other. To choose 2 bananas and 1 apple over 1 apple and 2 bananas, indicates that bananas are more valuable in the economy. The moment of indifference may occur somewhere inside one of the fruit.
I will continue my primer for you .......
