2. Sem. - Introduction to Economics an der Hochschule Aschaffenburg

A want is the lack of something a person would like to have.

Goods (and services) are the means to satisfy the wants.

Problem: Human wants are unlimited and there is only a limited amount of goods
available.

What amounts of which goods are being produced?
How are they produced and by whom?
How are the goods distributed(verteilt) to the members of the society?

Labor- the human input that goes into production.
Land- all the natural resources of the earth.

Capital- the equipment used to produce goods and services (not financial).
(Human capital- training, eductional achievement and skills that make a worker
productive.)

Positive analysis tries to describe economics phenomena without resources to
values. It describes how the the world is

Normative analysis tries to develop optimal solutions for economic problems
starting with given objectives based on values. It describes how the world ought to
be.

Households:
Demand → buy consumption goods
Supply → offer factors of production: labor, land, capital

Producers/Firms:
Demand → buy factors of production via salary, rent
Supply → offer goods

Government and central bank produce public and private goods and buy factors of production.

Models → theoretical construct representing economic processes

• Carefully define the economic problem in questions.
• Use assumptions to blend out irrelevant aspects of reality.
•  Analyse the model behaviour.
• Derive a hypothesis.
• Empirically test the hypothesis.

Principle #1: People face tradeoffs. (Kompromiss eingehen) - Follows from the scarcity of goods
Prinicple #2: The cost of something is that you have to give up to get it (opportunity cost: utility of alternative uses of resources, what you have to
give up in order to get) e. g. If I go to the University I cant earn money while working.
Principle #3: Rational people think at the margin. (Grenzdenken) - Its better to have something rather than nothing. An Airline should sell a last-minute ticket for 300€ rather than the average cost of 500€ because its more profitable than flying with empty seats.
Principle #4: People respond to incentives. (reagieren auf Anreize)
Principle #5: Trade can make everyone better off. (specialize on things you can do compartively better than others)
Principle #6: Markets are usually a good way to organize economic activity
Principle #7: Under special circumstances (bes. Umsände) governments can
improve market outcomes

Sunk costs are the costs of past actions, they are already paid, and represent no opportunity
for current choice.

Externality is the direct impact for one person’s actions on the well-being of another
person.

• Positiv externality: are given when production or consumption have a positiv sideeffect for a bystander, for example
  a farmer who grows apple trees provides a benefit to a beekeeper. The
  beekeeper gets a good source of nectar to help make more honey.
• Negative externality: are given when side effects of activities of an economic
  subject directly harm other people. For example If you play loud music at night, your neighbour may not be able to sleep.

Market Power is the ability (Fähigkeit) of a single economic actor (or small group of
actors) to have a substantial influence on market prices.

Public goods are characterized by the fact that a person unwilling to pay can not be
excluded from consuming the good.

Distributive Market Failure ... means, that the society is rejecting the market result on moral reasons , i.e. claiming that markets are not „just“ or “fair”

Productivity is measured as output per unit of factor input (e.g. quantity of goods produce per hour of labor input)