Assalamualaikum, bismillah, wa Alhamdulillah.
For this second post, I would like to share what I have learnt at my first Business Economic lecture a few weeks ago. I learnt about the main key concepts that economists interpret it in each view and analysis. These terms will stick and bind forever in economy field, there is no way to separate these terms from this study. Actually, the meaning of each term was usually applied in our life, but we as not economic person does not exposed to specific terms.
For an introduction, when we studying economy; we learn about the behavior of three sectors, they are (1) individual, (2) firms, and (3) government. They just do three things only; each party will (a) save, (b) spend or (c) invest their property or income. Let say, you have earned a lot of money. And then you are facing three situations above, either you want to save your money, or you want to spend it, or you want to invest it in plantation or oil and gas milling industry.
See. The example given above are just in the individual narrow scope, and when we implement and broaden the concepts in firms and government sector, there will be more complicated and absolutely are difficult to them to deal and make a decision.
When we talk about economy, we are talking about choices. You choose to buy iPad and not to buy laptop, you choose to eat what your mother cook and not to eat at warong and restaurant, you choose to travel by car and not travelling by bus or flight, government choose to buy submarine and not aircraft, government choose to give more incentive in halal sector and not to education sector. Why you make those choices? Because you have reasons, right? So, in this economic study we will learn the behavior that affects those choices and the effect of the choices.
Below are the terms, which I will explain based on what I understand. I hope this will make my dear friends understand easily.
1. Economics, mean; the science of how individual and societies deal with the fact that their wants are greater than the limited resource available to satisfy their wants. For example, let say you want a car. However you cannot purchase it because you do not have enough resource. What is your resource? Yes, that thing is inside your wallet.
In government sector for example, let say, Singapore want to be the oil and gas producer country. But, because of recourses are limited and they do not have any mines, so the government just only focused on certain industry such as tourism, health, and education.
2. Microeconomics, mean; deals with human behavior and choices as they relate to relatively small units. Micro means small. So, who will be involved in this microeconomic sector? They are an individual, a firm, and an industry.
3. Macroeconomics, mean; deals with human behavior and choices as they relate to the entire economy. Macro means big. So, all individual sectors, firms, industries and government itself will involved when we discussing about macroeconomics.
4. Scarcity, mean; the condition in which our wants are greater than the limited resource available to satisfy those wants. In our familiar term, scarcity means our nafsu. We want everything. We want house. We want car. We want to go to a vacation. Unfortunately, we cannot afford them all in one time. So we have to choose which one is more important right now.
5. Land, mean; any natural resource provided by Allah. Such as, minerals, forests, water, unimproved land, and sunlight.
6. Labor, mean; the physical and mental talents that people contribute to the production. Every people who involved in certain production are labor. Teacher is also a labor, because teacher produce intelligent person. Engineer, scientist, janitor, plumber, technician, manager, and lecturer are all labor.
7. Capital, mean; the produced goods that can be used as inputs for further production. Capital good does not directly related to satisfy human wants.
8. Entrepreneurship, mean; the particular ability of individuals to seek profit by taking risks and combining resources to produce innovative products, seek new business opportunity, and develop new ways of doing things.
*These; land, labor, capital and entrepreneurship are the business resources.
9. Ceteris paribus mean; all other things are constant, or in other word; nothing else change. Or, all other things remain unchanged and remain the same.
10. Opportunity cost, mean; the best alternative sacrificed for a chosen alternative. Opportunity cost does not mean ‘kos peluang’. Let say, you have an hour free time. As a student, you have two choices how to spend this pleasure time, either you want to make some revision or you want to sleep. If you choose to make some revision that mean you are sacrificing your sleep, and sleep is your second best choice you have. That is opportunity cost. Do you understand?
For the country especially, they always think what will they sacrificed if they choose something. For instance, the government has two choices in one time, either the government want to develop biotech industry or to develop nuclear industry. Because of resource limited, government chooses to develop biotech industry and was forced to forget about nuclear. Nuclear is the second best choice that government has to sacrifice. So, nuclear is the opportunity cost.
11. Marginal analysis, mean; we compare the additional benefits of a change with the additional cost of the change. For example, there is a shop that sells kerepek or snack. Each price per kerepek is RM 3.00. The seller told you, if you buy three packs of kerepek, the price you will be paid is RM 10. So, the question is, are you will get more benefit if you add RM 1 to buy three pack of kerepek?
Example above is an individual context. For government, they also apply this concept while they are making decision. Is the country will get more benefit if government spends a lot of money and focus to the gas and oil sector? Is the country will get more benefit if government focused more on education?
Chapter one finished. I hope you can understand my explanation. I know there are a lot of mistake especially the grammar, so, do not hesitate to leave comments. I also hope that you will correct me if the points and the explanations were wrong.
