1. ea BEVEZETŐ 2025 PI.pdf

# Introduction to economics Economics is the science of choice and the optimal utilization of limited resources. It is fundamental to understanding societal issues such as inflation, unemployment, and protectionism, requiring basic knowledge of its principles for informed decision-making as citizens and voters [4](#page=4) [5](#page=5). ### 1.1 Definition of economics Economics is defined as the science of choice, focusing on how to best use scarce resources. It is also described as the science of the modern market economy, with a historical perspective calling it "the oldest art and the newest science" [5](#page=5). ### 1.2 The nature of economics as a science Economics is an independent discipline with its own conceptual framework, including axioms and laws. Its aim is to uncover and describe the regularities and patterns within economic phenomena, a process that involves verification [6](#page=6). ### 1.3 The place of economics within social sciences Economics is categorized as a social science. It functions as both a foundational theoretical science and an applied science, indicating its dual role in both understanding and solving economic problems [6](#page=6). ### 1.4 Branches of economics Economics is broadly divided into two main categories: theoretical economics and applied economics [7](#page=7). #### 1.4.1 Theoretical economics Theoretical economics comprises several sub-branches: * **Microeconomics:** Focuses on the behavior of individual economic agents, such as households and firms [7](#page=7). * **Macroeconomics:** Studies the economy as a whole, including aggregate phenomena like inflation and unemployment [7](#page=7). * **International economics:** Deals with economic interactions between countries, such as trade and finance [7](#page=7). * **History of economic thought:** Examines the evolution of economic ideas and theories [7](#page=7). #### 1.4.2 Applied economics Applied economics takes the principles of theoretical economics and applies them to specific real-world contexts. Its sub-branches include: * **Sectoral economics:** Studies specific industries or sectors of the economy, such as industrial economics, agricultural economics, and commercial economics [7](#page=7). * **Functional economics:** Focuses on specific economic functions within organizations or the economy, such as finance, marketing, and accounting [7](#page=7). > **Tip:** Understanding the distinction between theoretical and applied economics is crucial for grasping how economic principles are developed and then used to address practical challenges. > **Example:** While macroeconomics (theoretical) might explain the causes of inflation using models, applied economics in the form of monetary policy would use these insights to set interest rates to control inflation. --- # Core economic concepts and components This topic introduces the fundamental building blocks of economics, examining how societies organize themselves to satisfy needs through the production, distribution, exchange, and consumption of goods and services, utilizing scarce resources [9](#page=9). ### 2.1 The economic process The core of economics revolves around the concept of "újra termelés" (reproduction or regeneration) which encompasses four key activities [10](#page=10): * **Production:** The creation of goods and services through the utilization of resources [10](#page=10). * **Distribution (Allocation):** The process by which owners of factors of production receive their share of the income generated from production [10](#page=10). * **Exchange:** The means by which members of society obtain goods and services that satisfy their needs [10](#page=10). * **Consumption:** The satisfaction of needs and the utilization of goods and services [10](#page=10). > **Tip:** Understanding these four stages is crucial, as they represent the cyclical flow within any economy. ### 2.2 Factors of production Production requires inputs known as factors of production (also called production resources or input factors). These factors are scarce and are owned by individuals or entities who then receive income for their contribution [11](#page=11) [9](#page=9). The primary factors of production are: 1. **Labour (L):** * Definition: The sum of people's physical and mental attributes that are utilized in the production process [12](#page=12). * Classification: Considered a primary factor of production, as it is not created for the purpose of production itself [12](#page=12). * Income/Cost: Wage [11](#page=11) [12](#page=12). 2. **Natural Resources (A):** * Definition: "Gifts" from nature, such as land, mineral resources, and water, which companies use as raw materials, sites, etc., in production [12](#page=12). * Classification: Also considered a primary factor of production [12](#page=12). * Income/Cost: Rent (or royalty) [11](#page=11) [12](#page=12). 3. **Capital (K):** * Definition: This includes physical capital goods (machinery, equipment, buildings, etc.) and monetary and securities capital ("abstract capital") [13](#page=13). * Classification: A secondary (produced) factor of production [13](#page=13). * Income/Cost: Interest [11](#page=11) [13](#page=13). 4. **Entrepreneur (E):** * Definition: The ability to effectively combine the factors of production, involving specialized knowledge related to managing a company and bearing risk [13](#page=13). * Classification: A secondary (produced) factor of production [13](#page=13). * Income/Cost: Profit [11](#page=11) [13](#page=13). > **Tip:** Distinguishing between primary and secondary factors of production helps in understanding their origins and roles in the economic system. ### 2.3 Needs * **Definition:** A need is a feeling of deficiency that compels action to eliminate it. Needs can be categorized as [18](#page=18): * Biological (existence) needs. * Needs arising from social coexistence [18](#page=18). * **Characteristics of Needs:** * They are constantly expanding [18](#page=18). * They are significantly influenced by the development of society, the economy, science, and culture [18](#page=18). * They are hierarchically built upon each other [18](#page=18). > **Example:** The need for food is biological, while the need for communication might arise from social interaction and is influenced by technological advancements. * **Maslow's Hierarchy of Needs:** The document references Maslow's hierarchy of needs, suggesting a pyramid structure illustrating the levels of human needs, from basic physiological requirements to self-actualization [19](#page=19). ### 2.4 Goods and Services To satisfy needs, goods and services are utilized [20](#page=20). * **Goods (Javak):** Products (material goods) and services that are capable of satisfying needs [20](#page=20). * **Free Goods:** Goods that can be consumed directly and are (in principle) available without limit [20](#page=20). * **Economic Goods:** Goods that are scarce and have a price. They can be further classified by: * **Form:** Goods and services [20](#page=20). * **Use:** Means of production (producer goods) and consumer goods [20](#page=20). * **Method of acquisition:** Private goods, public goods, and mixed goods [20](#page=20). > **Example:** Air is a free good, while a loaf of bread is an economic good, specifically a consumer good. A factory machine is an economic good, classified as a means of production. --- # Economic methodology and principles Economic methodology and principles explore how economists study the economy and the fundamental concepts that guide economic decision-making. This involves employing specific methods to simplify complex realities, analyzing choices based on costs and benefits, and understanding the inherent limitations of resources. ## 3. Economic methodology and principles Economic methodology encompasses the tools and approaches economists use to analyze economic phenomena, while economic principles are the foundational ideas that explain economic behavior and decision-making. ### 3.1 Methods in economics Economists utilize several methods to construct and analyze economic models and theories. #### 3.1.1 Modeling * **Model:** A simplified representation of reality [14](#page=14). * **Model building:** Involves highlighting essential features for analysis while abstracting from irrelevant details [14](#page=14). * **Disadvantage:** Conclusions derived from erroneous assumptions can be false [14](#page=14). * **Advantage:** Facilitates a clearer understanding of complex relationships [14](#page=14). * **Verification:** An important aspect of model building is ensuring that the results can be traced back to reality [14](#page=14). * **Ceteris paribus principle:** Assumes that when analyzing the impact of one factor, all other factors remain unchanged [14](#page=14). #### 3.1.2 Aggregation * Microeconomic actors are categorized into sectors [14](#page=14). * Produced goods are also aggregated [14](#page=14). * This dual aggregation is fundamental to macroeconomics [14](#page=14). #### 3.1.3 Marginal analysis * Economics emphasizes marginal analysis alongside average calculations [15](#page=15). * **Concept of marginal value:** Indicates how the introduction of an additional unit of a good into production or consumption affects a given value (e.g., revenue, cost, profit) [15](#page=15). #### 3.1.4 Abstraction * Involves detaching from or abstracting from specific details to highlight essential elements [16](#page=16). #### 3.1.5 Deduction * A method of reasoning that moves from general phenomena to specific instances [16](#page=16). #### 3.1.6 Types of economic methods based on time * **Static methods:** These methods disregard processes that occur over time, focusing on a particular situation or state of the economy [17](#page=17). * **Dynamic methods:** These methods concentrate on the temporal flow of events, examining changes and processes in the economy's state [17](#page=17). ### 3.2 Core economic principles These principles form the bedrock of economic reasoning and decision-making. #### 3.2.1 Rationality * All decisions are considered rational if they aim to achieve a better outcome and avoid a worse one [15](#page=15). * Individuals always choose the alternative that is best for them [15](#page=15). * **Types of rationality:** * **Consumer rationality:** Maximizing utility [15](#page=15). * **Producer (firm) rationality:** Maximizing profit [15](#page=15). * **Rationality of owners of factors of production:** Maximizing interest, land rent, rental fees, etc. [15](#page=15). * **State rationality:** Maximizing social welfare [15](#page=15). #### 3.2.2 Opportunity cost * Acquiring anything, whether in production or consumption, involves a sacrifice [16](#page=16). * **Definition:** The economic cost of a chosen activity is the value of the best alternative forgone due to that activity, which is the opportunity cost [16](#page=16). * **Two conditions for its existence:** * The possibility of choosing among alternatives [16](#page=16). * The presence of a limiting condition (e.g., income or time constraints) [16](#page=16). #### 3.2.3 Scarcity * **Root cause of economic problems:** Scarcity [21](#page=21). * **The problem of scarcity:** Resources (factors of production) are available in limited quantities (and quality), meaning they are insufficient to satisfy all needs [21](#page=21). * The tool for modeling scarcity is the Production Possibilities Frontier (PPF) curve [21](#page=21). * Scarcity necessitates choices and decisions [21](#page=21). ### 3.3 Economic efficiency and division of labor These concepts are crucial for managing scarce resources. #### 3.3.1 Economic efficiency * There must be an endeavor to utilize scarce resources as efficiently as possible [22](#page=22). * **Formula for economic efficiency:** $$ \text{Economic efficiency} = \frac{\text{Result}}{\text{Input}} $$ * **Interpretation:** The result achieved per unit of input [22](#page=22). * **Example:** The quantity of product per worker, or the quantity of product per labor hour [22](#page=22). #### 3.3.2 Division of labor * The primary method for increasing economic efficiency [23](#page=23). * **Process:** In the division of labor, the activity of a participant in the work process is separated from the activities of others [23](#page=23). * **Forms of division of labor:** * **Natural division of labor:** Based on sex and age [23](#page=23). * **Technical (activity-based) division of labor:** * **Professional division of labor:** e.g., locksmith, teacher, doctor [23](#page=23). * **Skill-based division of labor:** based on primary, secondary, or tertiary education [23](#page=23). * **Geographical division of labor:** activities based on local resources, leading to international division of labor [23](#page=23). * **Work-nature division of labor:** intellectual and physical labor [23](#page=23). * **Social division of labor:** * **Cooperation:** The collaboration of distinct economic actors engaged in the division of labor [23](#page=23). --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Economics | The science of choice and the optimal utilization of limited resources to satisfy unlimited wants. It studies how individuals, firms, and societies make decisions in the face of scarcity. | | Microeconomics | A branch of economics that examines the behavior and decision-making of individual economic agents, such as consumers, households, firms, and the state. | | Macroeconomics | A branch of economics that studies the economy as a whole, analyzing the aggregate behavior of sectors like businesses, households, and the government, as well as overall economic indicators. | | Production | The process of using resources (inputs) to create goods and services (outputs) that satisfy human needs and wants. | | Distribution (Allocation) | The process by which the factors of production receive their share of the income generated from the production of goods and services. | | Exchange | The process by which individuals in a society obtain goods and services to satisfy their needs, often involving the trade of goods, services, or money. | | Consumption | The use or utilization of goods and services to satisfy human needs and wants, ultimately leading to the depletion of their utility. | | Factors of Production | The basic resources used in the production of goods and services. These include labor, capital, natural resources, and entrepreneurship. | | Labor (L) | The physical and mental efforts of people used in the production process. Its income is known as wages. | | Capital (K) | Manufactured goods, such as machinery, equipment, and buildings, used to produce other goods and services. Its income is known as interest. | | Natural Resources (A) | Gifts from nature, including land, minerals, and water, used in production. Their income is known as rent or land yield. | | Entrepreneurship (E) | The special skill and ability to combine the factors of production effectively, manage a business, and take on risk. Its income is known as profit. | | Scarcity | The fundamental economic problem that arises because human wants are virtually unlimited, while the resources available to satisfy them are limited. | | Economic Efficiency | The optimal use of scarce resources to achieve the greatest possible output or benefit with the minimum amount of input or cost. | | Division of Labor | A method of increasing economic efficiency by breaking down a production process into specialized tasks, with individuals focusing on specific activities. | | Opportunity Cost | The value of the best alternative foregone when a choice is made. It represents the economic cost of any decision or activity. | | Rationality | The principle that individuals and economic agents make decisions that are intended to achieve the best possible outcome and avoid worse ones, based on available information and preferences. | | Marginal Analysis | An economic method that focuses on the impact of one additional unit of a good, service, or resource on a particular value, such as revenue, cost, or profit. | | Model | A simplified representation of reality used to understand complex economic phenomena. Models highlight essential features while abstracting from less relevant details. |