Microeconomics This is in contrast to macroeconomics, which involves the "sum total of economic activity, dealing with the issues of growth, inflation, and unemployment." Microeconomics also deals with the effects of national economic policies (such as changing taxation levels) on the aforementioned aspects of the economy. Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations'—i.e. based upon basic assumptions about micro-level behavior. Assumptions and definitions Microeconomic theory progresses by defining a competitive budget set which is a subset of the consumption set. The utility maximization problem is the heart of consumer theory. The utility maximization problem is a simple constrained optimization problem in which an individual seeks to maximize utility subject to a budget constraint. The theory of supply and demand usually assumes that markets are perfectly competitive. Microeconomic topics Monopoly
Economics For a topical guide to this subject, see Outline of economics. Economics is the social science that studies the behavior of individuals, households, and organizations (called economic actors, players, or agents), when they manage or use scarce resources, which have alternative uses, to achieve desired ends. Agents are assumed to act rationally, have multiple desirable ends in sight, limited resources to obtain these ends, a set of stable preferences, a definite overall guiding objective, and the capability of making a choice. The traditional concern of economics is to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an exchange economy. An agent may have purposes or ends, such as reducing or protecting individuals from crime, on which he or she wants to spend resources. Definitions There are a variety of modern definitions of economics. J. Economics is a study of man in the ordinary business of life. Microeconomics
Government debt Government debt (also known as public debt, national debt and sovereign debt) is the debt owed by a central government. (In federal states, "government debt" may also refer to the debt of a state or provincial, municipal or local government.) By contrast, the annual "government deficit" refers to the difference between government receipts and spending in a single year, that is, the increase of debt over a particular year. Government debt is one method of financing government operations, but it is not the only method. Governments can also create money to monetize their debts, thereby removing the need to pay interest. But this practice simply reduces government interest costs rather than truly canceling government debt, and can result in hyperinflation if used unsparingly. As the government draws its income from much of the population, government debt is an indirect debt of the taxpayers. History The sealing of the Bank of England Charter (1694) By country Risk
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, CB, FBA (/ˈkeɪnz/ KAYNZ; 5 June 1883 – 21 April 1946) was a British economist whose ideas have fundamentally affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century. His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that: "His radical idea that governments should spend money they don't have may have saved capitalism." He has been described by The Economist as "Britain's most famous 20th-century economist. Early life and education King's College, Cambridge. Career
Scarcity Map of the global distribution of economic and physical water scarcity as of 2006 Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. A common misconception on scarcity is that an item has to be important for it to be scarce. This is not true, for something to be scarce, something must be given up, or traded off, in order to obtain it. Concept The notion of scarcity is that there is never enough to satisfy all conceivable human wants, even at advanced states of human technology. For example, although air is more important to us than gold, it is cheaper simply because the production cost of air is zero. Other uses of the term scarcity In biology, the term scarcity can refer to the uncommonness or rarity of certain species. See also Notes References Milgate, Murray (March 2008).
Supply and demand The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product. If demand increases (demand curve shifts to the right) and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.If demand decreases (demand curve shifts to the left) and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.If demand remains unchanged and supply increases (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price.If demand remains unchanged and supply decreases (supply curve shifts to the left), a shortage occurs, leading to a higher equilibrium price. Graphical representation of supply and demand Supply schedule The determinants of supply are: Demand schedule
Economic policy Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labor market, national ownership, and many other areas of government interventions into the economy. Most factors of economic policy can be divided into either fiscal policy, which deals with government actions regarding taxation and spending, or monetary policy, which deals with central banking actions regarding the money supply and interest rates. Such policies are often influenced by international institutions like the International Monetary Fund or World Bank as well as political beliefs and the consequent policies of parties. Types of economic policy Almost every aspect of government has an important economic component. Macroeconomic stabilization policy Fiscal policy, often tied to Keynesian economics, uses government spending and taxes to guide the economy. Notes
Keynesian economics The theories forming the basis of Keynesian economics were first presented by the British economist John Maynard Keynes in his book, The General Theory of Employment, Interest and Money, published in 1936, during the Great Depression. Keynes contrasted his approach to the aggregate supply-focused 'classical' economics that preceded his book. The interpretations of Keynes that followed are contentious and several schools of economic thought claim his legacy. Keynesian economists often argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle. Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions. Overview Theory Concept Excessive saving
Opportunity cost History The term was first used in 1914 by Austrian economist Friedrich von Wieser in his book Theorie der gesellschaftlichen Wirtschaft  (Theory of Social Economy). The idea had been anticipated by previous writers including Benjamin Franklin and Frédéric Bastiat. Franklin coined the phrase "Time is Money", and spelt out the associated opportunity cost reasoning in his “Advice to a Young Tradesman” (1746): “Remember that Time is Money. He that can earn Ten Shillings a Day by his Labour, and goes abroad, or sits idle one half of that Day, tho’ he spends but Sixpence during his Diversion or Idleness, ought not to reckon That the only Expence; he has really spent or rather thrown away Five Shillings besides.” Bastiat's 1848 essay "What Is Seen and What Is Not Seen" used opportunity cost reasoning in his critique of the broken window fallacy, and of what he saw as spurious arguments for public expenditure. Opportunity costs in production Explicit costs Implicit costs
Currency appreciation and depreciation The depreciation of a country's currency refers to a decrease in the value of that country's currency. For instance, if the Canadian dollar depreciates relative to the euro, the exchange rate (the Canadian dollar price of euros) rises: it takes more Canadian dollars to purchase 1 euro (1 EUR=1.5 CAD → 1 EUR=1.7 CAD). When the Canadian dollar depreciates relative to the euro, Canadian goods become more competitive on world markets because their price when exchanged to euro will be lower. The result will be an increase in Canadian exports. On the other hand, European sellers that denominate their goods and services in euros will be less competitive, because European products denominated in euros will be more expensive in Canada. The appreciation of a country's currency refers to an increase in the value of that country's currency. How currency appreciates See also References Google Define: Currency depreciation
Opinion / Lead : New geography with old geometry The international institutional structure has remained largely static since the mid-20th century rather than evolving with the changing power realities and challenges. Reforming and restructuring the international system poses the single biggest challenge to preserving global peace, stability, and continued economic growth. A 21st century world cannot remain indefinitely saddled with 20th century institutions and rules. Power shifts are an inexorable phenomenon in history. For example, it was only after the Cold War began that the Soviet Union rose as a global military power, although it failed to become a true economic power. Quirk of history The United States emerged as the sole superpower due to a quirk of history — the sudden, unexpected collapse of the Soviet Union. The fact is that there has never been a global hegemon on the lines of America. A liberal, rules-based international order for the 21st century can be developed if sincere efforts begin toward that goal.