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Fundamentals of Economics - Coggle Diagram
Fundamentals of Economics
Concept and Object of Study
Economics
o Social science that studies the management of scarce resources
o Central problem: scarcity → decisions on what, how, and for whom to produce
o More than money or wealth: human choices facing limited resources
o Applications: markets, education, health, environment, policy, etc.
o Evolution: from moral philosophy to science with theoretical models and empirical analysis
o Impact: influences public policies, businesses, and daily life → a tool to understand and transform society
Scarcity, Needs, and Resources
• Scarcity: limited resources vs unlimited needs
• Human needs:
o Basic: food, housing, health, education, water, security
o Secondary: comfort, status, leisure, technology, luxury
• Resources:
o Natural (water, oil, minerals, forests)
o Human (labor, knowledge, creativity)
o Technological (innovation, processes)
o Financial (money, credit, investment capital)
• Rational management: decisions based on efficiency, equity, and sustainability
• Opportunity cost: benefit lost when choosing one alternative over another
• Varies according to socioeconomic and political context
Historical Evolution of Economic Thought
• Antiquity:
o Plato and Aristotle → ethics and politics, household management vs unlimited wealth
o Rome → land ownership and imperial administration, no structured theory
• Middle Ages:
o Influence of the Church
o Thomas Aquinas and the "just price" (ethical concept in exchanges)
• Modern Age (15th–17th centuries):
o Mercantilism → wealth measured by precious metals, state regulation, protectionism
• 18th century:
o Adam Smith and classical economics → productive labor, "invisible hand," self-regulating markets
o Classical economists: Ricardo, Malthus, Mill → minimal state, natural laws of wealth
• 19th century:
o Karl Marx → historical and structural critique, labor exploitation, social conflict
• 20th century:
o Keynesianism → markets do not always self-regulate, active state intervention to stabilize economy
o Post-Keynesian and other currents → monetarism (Friedman), rational expectations, behavioral economics
• Present:
o Plurality of approaches (neoclassical, institutionalist, feminist, ecological, behavioral, etc.)
o Economics as a dynamic and multidimensional science, open to debate
Branches of Economics
Macroeconomics
o Study of aggregated variables: GDP, inflation, unemployment, interest rates
o Emerged after 1929 crisis → need to explain economic imbalances
o Economic policy: fiscal, monetary, exchange rate, structural
o Recognizes market failures and justifies state intervention
Micro-macro relationship
o Complementary and interconnected
o Microfoundations of macroeconomic models
o Key for comprehensive analysis and effective policy design
Microeconomics
o Study of individual agents (consumers, firms, workers)
o Rational decisions: maximizing utility/profit
o Analysis of prices, competition, monopoly, efficiency, equity
o Application in specific markets, targeted public policies
o Subfields: consumer theory, firm theory, game theory, behavioral economics
Economic Systems and Their Classification
Mixed economies
o Combination of market and state with varying degrees of intervention
New models
o Conscious capitalism, collaborative economy, solidarity economy, circular economy
o Incorporate ethics, sustainability, and social justice
Historical evolution
o Primitive communism → collective ownership, subsistence economy
o Slavery → private ownership of means and workers
o Feudalism → land controlled by lords, dependent serfs
o Capitalism → private property, free market, profit, capital accumulation
o Socialism → state ownership, centralized planning, social equity
Economic system
o Set of principles, institutions, and mechanisms organizing production, distribution, and consumption
o Reflects social, political, and cultural organization