Day 8 – Economics (BUS-600)

1. From study this chapter, I believe that economics is a theory to view the business in a much bigger picture such as an industry or entire society. It studies how society allocates the limited resources of the earth to insatiable appetites of humans. Supply and demand are the forces at work. They reach equilibrium through market price. That is, the market price allows the quantity supplied equals to the quantity demanded, and then achieves the equilibrium.  
2. There are two levels of economics: Microeconomics and Macroeconomics.   Microeconomics deal with the supply and demand equation of smaller scale economic behavior for individual, family, company, and industry. Macroeconomics studies large scale behavior for entire economy. It concerns itself with the economies of cities, countries, or the world.
3. In Microeconomics, the increase in production of goods or service requires certain cost or sacrifice, these cost is called opportunity cost.  In contract, the added revenue and cost of producing and selling one additional unit is called marginal revenue and cost. To view a value of a product to a consumer, the usefulness or utility of having an additional unit of a product is defined as marginal utility.
4.  Supply equals demand at an equilibrium price. Consumers try to minimize opportunity cost and maximize the marginal profit and utility. The consumer’s responsiveness or sensitivity to change in price is called price elasticity of demand. The elasticity of quantity demand and total revenue con be measured and calculated quantitatively in term of elastic coefficient.
5. We are living in a competitive market structures. There are four basic market structures: Pure monopoly (single seller, multiple buyers for a given product), Oligopoly (few suppliers dominate and set the price and play rules), Monopolistic competition (many product with differentiations), and Pure Competition (may competitors sell a similar substitutable product).
6. Macroeconomics helps us to understand the forces that shape the larger economy in which their companies operate.  Though there are many different theories, the fundamental principles of the macroeconomics may provide the framework within which to take intelligent estimation and projection about the future.
7. Global or International Macroeconomics looks into a much broader view to understand the globalization of the world’s economy, and international economy.  It analyzes the large frameworks to make a prediction on economic stability and inflations.