Introduction to Economics

1.1 WHAT IS ECONOMICS?

Economics is a social science that studies human activities of production, consumption, exchange.

Today the study of economics can be divided into four main fields :

Business economics :
Studies enterprises. How small a company take decision to produce and reach its objectives.

Main topics include : different types of businesses (sole traders, partnerships, limited companies, public companies, franchises); the micro and macro environments of a firm, company objectives (profit, market shares and growth, survival, smart objectives), production (fixed, variable, total, average costs and revenues; break-even and profit analysis), productivity (labour and capital productivity), marketing, CSR (corporate social responsibility).

Micro-economics :
studies economic agents behaviour and individual markets. How do consumers and firms make choices, how do these choices affect and determine the price and quantity on a market?

Main topics include : scarcity and choice (limited resources, unlimited wants, opportunity cost), consumer behaviour (needs, wants, preferences, utility and marginal utility), budget constraint (income, prices, consumption possibility functions, optimums), production (production functions, cost functions, marginal revenue and profit maximisation), productivity (labour and capital productivity, labour organisation and technology - Taylorism, Fordism, Toyotism, automation, robotics, Industry 4.0), type of markets (perfect competition, monopoly, oligopoly, oligopsony, monopsony); market mechanisms (equilibrium price and quantity, optimum), market failures (externalities, public goods, asymmetric information) and government interventions on markets (taxes, subsidies, ceilings/floors, regulations).

There is substantial overlap among the different domains. For example, an increase in SNB interest rates is a macroeconomic decision; it affects the financial markets through bond yields and borrowing costs; it changes business decisions about future investment and affects production costs; at the microeconomic level it affects market prices and consumption.

1.2 WHAT IS AN ECONOMY?

When we talk about an economy, we generally talk about a territory, a geographical area in which there are economic activities that is where there are producing and consuming goods and services. We can talk of a national economy (sum of a regional economy, the local economy or the European Union's economy) or even of the world economy.

1.3 WHAT IS PRODUCTION?

Production is the act of making and selling a good or service in the private sector. Companies objectives can be to achieve production to grow and increase their market shares or maybe to survive in rough times. Their main objectives at all time is to maximise profits.

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